Field agents employed by business correspondents (BCs) for distribution of financial products in villages will now have a minimum fixed pay component in their remuneration package, instead of the variable and performance-linked structure now.
Banks have decided that their BCs should pay their agents a minimum of Rs 3,500 per month. Incentives would be in addition to this fixed pay. The move is aimed at reducing the scope of reputational and operational risks of banks.
Bankers note that field agents have a low fixed pay component, prompting them to often switch jobs to stabilise their monthly income. “These agents are distributing products on behalf of the bank,” said an official of a Mumbai-based public sector bank. “Hence, the bank’s reputation is at stake if they do not behave properly with customers. There is a need to incentivise them to reduce the bank's reputational and operational risks.”
FINO, a Mumbai-based BC, terms the IBA's proposed agent fee structure as “good” and “in the right direction”. However, notes Manish Khera, its chief executive officer, "fixing a higher fee or salary threshold does not necessarily reduce the moral risk". This can be controlled or managed by continuous education programmes and consumer awareness drives for agents, he says. “This is for the benefit of the reputation of both the banks and the BCs.”
The Indian Banks' Association, the industry body for banks in the country, has already communicated the minimum monthly pay for the BCs' agents to state-run and private sector lenders. Some banks have already directed their the correspondents to implement these proposals.
“We have already started it among our BCs,” says a senior executive with Bank of India. “This will help in retaining agents in a particular area for a long time. It is essential in building trust among local villagers.”
Industry players say field agents are paid on project basis, and in most cases, lack a fixed component in their salary structure. Even if there is a fixed salary, it is not more than Rs 1,200 per month.
BCs have welcomed the decision, but add that banks should also ensure a fixed revenue model for them to ensure the success of the move.
SEED Financial Services, which has 3,000 agents covering 5,000 villages, says agents are the “most productive part” of its mechanism. “Hence, it is important to ensure their job satisfaction,” notes Anirban Roy, founder and managing director.
He, nonetheless, notes that the government and banks should also support this model. "BCs should also have some assured revenue flow," he adds. "If that happens, we will be happy to pass on the benefits to our agents."
FINO will hold discussions with banks and work out an agreed mechanism to execute the pay structure.