Low DBT commission may undermine PMJDY success: MicroSave report

Current commission payable is 1%, capped at Rs 10 per transaction

The Indian government's direct benefit transfer (DBT) commission rate in rural areas (currently 1 per cent subject to an upper limit of Rs 10 per transaction) is too low to ensure the success of Jan-Dhan Yojana, said a report by an international financial inclusion consulting firm MicroSave.

According to MicroSave, the success of the Jan-Dhan Yojana depends on the reach and quality of last-mile business correspondents (or Bank Mitra) established by banks and deployed by the Business Correspondent Network Managers (BCNMs). Without access to a well-trained, transaction-ready and trustworthy Bank Mitra, customers will not be able to use their Jan-Dhan Yojana accounts.

"If rates are too low for the disbursement of DBT payments to be a viable business proposition for last-mile banking agents, then this scheme will be over before it has started," said Manoj Sharma, Managing Director--Asia, MicroSave.

The results of MicroSave's new costing analysis find the 1 per cent commission rate to be too low to support the networks of these Bank Mitras in rural areas. MicroSave recommends a minimum DBT commission rate of 3 per cent for the first few years of the government's DBT and Jan-Dhan Yojana roll-outs in order to build a sustainable network of Bank Mitras providing quality services.

The MicroSave Policy said that in the last three years, as many as 22-35 per cent of Bank Mitras (previously known as business correspondents) appointed to deliver financial services have become dormant.