Business Correspondents (BCs)

The Department of Financial Services (DFS) has called a meeting of the monitoring committee on the functioning of business correspondents (BCs) 

Business Correspondent (BC)

A Business Correspondent (BC) is a representative of the bank, who offers banking services to people in the unorganized sectors. BCs are an important constituent of financial inclusion, which means making banking accessible to everyone.

• What does a BC do?
  • Open a person’s bank account, Process a loan application, Deposit money and withdraw money, and many other financial services.
• How does a BC function?
  • BCs make use of the mobile phone in the facilitation of the services provided by a bank
  • A customer may make a transaction after he/she makes an electronic signature and/or thumb impression.
  • For each transaction the BC completes, it is compensated.
• Why do BCs matter?
  • BCs can facilitate a bank’s penetration of previously unreachable locations.
  • BCs enable low-cost delivery of banking services.

Key Agenda Items:

• Review of outdated commission rates, which have not been adjusted for inflation or rising operational costs.
• Discussion on the waiver of penalties for BCs to ease financial burdens.
• Exploration of creating an infrastructure and equity fund for corporate BCs.

Scrutiny of C. S. Setty Report (December 2022)

• Enhancement in BCs service portfolios, Commission-Sharing structure which should be more transparent and non-biased, Rebalance Commission rates to regions, Group BCs under various heads as per the service capabilities, Improvement in the Financial Liquidity issues of BCs

Issues in Business Correspondent (BC)

• Static Commission Rates:
  • The BC profitability gets impacted, mainly in rural and semi-urban areas.
• High Attrition:
  • BCs have a very high attrition rate due to low commissions and operational demands.
• Limited Value-Added Services:
  • BCs operate mostly on cash-in, cash-out operations and get limited training to offer more financial products.

Capacity-Building and Governance

• Need better training of the field staff and development of a larger pool of skilled trainers.
• Increase in Digital Banking Units (DBUs)

Source: Business Standard