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Business correspondents (BCs) are usually NGOs, MFIs (microfinance institutions), societies, or retired bank/government employees.
They are appointed by banks to speed up the process of financial inclusion. Fifty-nine per cent of the adult population in the country does not have a bank account.
BCs are roped in to disburse small loans, recover loans, collect small deposits, sell micro insurance, and deliver small-value remittances.
Banks can save on brick and mortar costs, as well as tackle the low value/high volume dilemma, by using BCs.
Banks pay BCs a commission. This, however, proves inadequate and a number of BCs have reported losses or suspended operations. Or they start charging the customer directly for services rendered on behalf of the bank.
Beneficiaries of such outreach programmes are often illiterate and vulnerable to exploitation. The bank earns a bad name and experiences the hazard of ‘Agency Risk'.
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