Business Correspondents (BCs) across India have raised serious concerns about their financial viability, citing the lack of revision in commission structures for over a decade. 

The issue was highlighted during the eighth Monitoring Committee meeting on BC matters chaired by Department of Financial Services (DFS) Secretary M. Nagaraju on Tuesday, sources said.

The meeting saw participation from senior officials of public and private sector banks, NABARD, NPCI, IBA, and BC representative bodies like the Business Correspondent Resource Council (BCRC).

Stagnant Commission Structures

The BCRC, representing BCs across the country, voiced concerns over the stagnant or downward-trending commission rates that have not been revised in the last 10 years. This has stressed the BC channel financially, particularly in regions like the Northeast and other difficult-to-access areas.

To address the issue, NABARD proposed an incentive scheme of ₹1,000 per month for BCs operating in such regions. However, BCRC flagged that BCs are unaware of the scheme’s modalities and demanded that incentives be directly transferred to them. Banks were also urged to establish special incentive structures for these regions to improve BC viability.

DFS Secretary Nagaraju instructed banks to re-evaluate their commission frameworks to support BCs better, particularly in remote and challenging locations.

Penalties Strain BC Operations

Another major issue raised was the imposition of penalties on BCs in recent years. For the first 15–16 years of the BC model, penalties were not levied due to its low-cost, low-revenue nature. However, banks have recently begun imposing penalties, often on arbitrary grounds.

BCRC highlighted that one public sector bank has introduced 11 types of penalties for reasons not clearly defined in agreements. Many of these penalties, BCs argued, arise from situations beyond their control, further affecting their sustainability.

While some banks clarified that they are not actively imposing penalties despite their inclusion in agreements, DFS Secretary Nagaraju urged banks to reassess their penalty structures. He emphasized that penalties, barring cases of inactive customer service points (CSPs), should not undermine the channel’s viability.

Disengagement of Smaller Players

Concerns over the potential disengagement or deactivation of smaller state or circle-level BCs were also raised. BCRC noted that many such players have been efficiently operating for years and employ a significant workforce. Disengagement or merger of these entities could result in job losses.

SBI’s Managing Director mentioned that smaller BCs with single-digit kiosk codes might lack the capacity to invest in technology and remain viable. The BCRC, however, called for a balanced approach to safeguard the interests of these BCs and their employees.

Exorbitant Security Deposits

Another critical issue flagged was the hefty security deposits required by some banks. Reports indicated that banks demand security deposits ranging from ₹50 lakh to ₹1.8 crore for 1,000 kiosk points, placing an enormous financial burden on corporate BCs.

DFS Calls for Action

DFS Secretary Nagaraju, after listening to all stakeholders, emphasized the need for urgent action on commission and penalty-related issues. Joint Secretary Prasant Goyal outlined actionable steps to ensure the sustainability of the BC industry, which is critical to financial inclusion initiatives.

As the backbone of India’s financial inclusion strategy, BCs seek  immediate reforms to ensure their financial health and operational sustainability. Without these changes, the progress of financial inclusion efforts in remote and underserved areas could be severely hampered, industry observers said.

Published on January 23, 2025