Money & Banking

Business correspondents serving other banks' customers will help expand financial inclusion

A. J. Vinayak N. S. Vageesh Mangalore/Mumbai | Updated on November 15, 2017


Business correspondents (BCs) appointed by banks in rural areas aren't making enough money. Catering to anywhere between 100-200 low-income customers with low transaction volumes doesn't generate enough commission for them.

Many of them quit after a few months in the job. Banks are, therefore, faced with the challenge of retaining these BCs, if they hope to make a dent in rural markets and advance financial inclusion.

In this backdrop, the Reserve Bank of India's move to allow BCs of one bank to serve customers of other banks has been welcomed by all. Bankers say that it will benefit customers, banks and the BCs themselves.

Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, told Business Line that customers will now get numerous access points for banking. This provision will also help improve the income of BCs.

Mr Ajai Kumar, Chairman and Managing Director, Corporation Bank, said the move would provide alternative channels for no-frill accountholders to access basic banking services. Even some operational difficulties such as machine failure or discontinuation of a BC will not hamper services as it has done in the past. Besides, it would also help customers when they visit any other place for social or business requirements, he said.

Mr Srikantha Shenoy, Executive Trustee of IDF (Initiatives for Development Foundation), a BC for SBI in Kunigal taluk in Karnataka, said: “It would diversify BCs' revenue sources, help in negotiation of better commission from the competing banks.”


However, other challenges remain.

Ms Subhalakshmi Panse, Executive Director, Vijaya Bank, said that cash management issues crop up while dealing with BCs. For servicing customers, BCs have to take cash from the nearest branch.

Till now, for the BC, the bank was very near (because he/she was usually within a 15-km radius and servicing clientele who were on the periphery of urban clusters). Now, that banks have to go deeper (villages with population of 1,000 to 2,000), they will need to find ways to send cash, manage it and take care of security at the BC's place of business.

Technological compatibility is another issue. The RBI says that the technology available with the bank, which has appointed the BC, should support carrying out such operations with other banks. The RBI had mandated that transactions and authentications should be carried out online on a core banking software platform.

Mr Shenoy felt that this is still futuristic as the technology environment is very fragmented.

However, bankers think that the National Payment Corporation of India could help in making point-of-sale (PoS) machines compatible to handle other banks' customers also.(The PoS terminals at BCs end help carry out small amount transactions — including deposits of money and withdrawals.)



Published on April 11, 2012

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