A first in 12 years: Banks to overhaul terms of engagement with BCs

Viability package for agents in NE states on cards

Banks are set to take a fresh look at the remuneration paid to, and the penalties imposed on, business correspondents (BCs) in the first such move in 12 years. This follows a meeting held on Tuesday at the behest of the Department of Financial Services (DFS) and the monitoring committee on the functioning of business correspondents (BCs).

 

In a first, “the engagement of women BCs and an incentive package for the viability of BCs in the Northeastern states and difficult centres also figured in the discussions”, said a source.

 

The issue of utilising the channel to sell other financial products, such as insurance or mutual funds, could not be addressed due to time constraints.

 

The meeting was chaired by DFS Secretary M Nagaraju and attended by representatives from the Business Correspondent Resource Council, Business Correspondent Federation of India, National Bank for Agriculture and Rural Development (Nabard), the National Payments Corporation of India, the Indian Banks’ Association, and the senior brass of both state-run and private banks.

 

A source said, “We could see the emergence of a commission payout structure that accounts for the variance among corporate BCs, which employ anywhere from 50 to 15,000 bank mitras.”

 

On penalties, some banks mentioned that, although there is a clause for penalties in their agreements with BCs, they are not enforcing it. The hefty amounts charged by banks as security deposits — ranging between Rs 50 lakh and Rs 1.8 crore for 1,000 kiosk points — were also discussed at the meeting.

 

It was indicated that the establishment of an infrastructure and equity fund for corporate BCs, with the option to tap Nabard and the Reserve Bank of India’s Payments Infrastructure Development Fund, could be taken up at a later date.

 

BCs have recently raised concerns about the viability of the BC channel with the Ministry of Finance, warning that it is becoming increasingly unfeasible. In November last year, the BCRC raised these concerns during a meeting with the Minister of State for Finance Pankaj Chaudhary.

 

The meeting revisited the aspects highlighted by the working group set up under the chairmanship of C S Setty, which submitted its report in December 2022. Setty (currently chairman of State Bank of India) was, at that time, the bank’s managing director.

 

NEW TERMS OF BUSINESS

 

•          Fresh look at the remuneration paid to and penalties imposed on business correspondents (BCs), the first in 12 years

 

•          A commission structure that takes into account the size of corporate BCs

 

•          Engagement of women BCs

 

•          Incentive package for the viability of BCs in the Northeastern states and difficult centres