Group representing business correspondents seeks regulatory status

Self-regulatory organisation status for business correspondents will improve governance, bring in investments

The Business Correspondent Federation of India (BCFI) is about to apply for self-regulatory organisation (SRO) status.

 

“We have started the process internally. We may either go alone, or team up with the Payments Council of India or the Fintech Convergence Council,” said a source.

 

While there is no category of non-banking financial companies: business correspondents (NBFC: BCs), they play a huge role in the financial inclusion landscape by aiding last-mile credit delivery. The stress on financial inclusion has also increased the intersection points of BCs with the wider financial world. This calls for better governance standards, higher investments and business models, and thus the need for a BC-SRO.

 

BCs have also, of late, been sounding the Ministry of Finance that the channel is becoming unviable.

   

The first signs that this model is ripe for overhaul were evident last year when BCFI and Grameen Foundation India made a case for “concrete capacity building”. Another industry body — The Business Correspondent Resource Council (BCRC) — had sought the setting up of an India Business Correspondent Equity Fund (akin to the India Microfinance Equity Fund) from the department of financial services. Both requests are a lift-off from the C Rangarajan Committee report on Financial Inclusion (January 2008), which was for funds being provided to specialised institutions that provide capacity-building inputs to BCs.

 

Another pain-point is the rise in the number of instances where law enforcement agencies are freezing the accounts of BCs as the channel is being used by cybercriminals.

 

At a meeting held last month with Minister of State for Finance Pankaj Chaudhary, BCRC had raised the issue of stagnant commission rates for corporate BCs and Bank Mitras, which have not seen a revision in the last 12 years. This has severely impacted Bank Mitras at the ground level, leading to high attrition and a loss of livelihood, particularly in rural and semi-urban regions. The commission rates established over a decade ago have not been adjusted for inflation or rising operational costs, leading to decreased profitability of the channel. It was also emphasized that an increase in commission rates would not only stabilize the livelihoods of Bank Mitras but also directly contribute to enhancing financial inclusion. Field agents are being wooed by e-commerce firms like Amazon, Flipkart and Blinkit.

 

BCs are of the view that overdependence on “cash-in, cash out”, or CICO (the trade jargon for cash deposits and withdrawals), and little training in value-added services are hampering the ability to develop cross-sell or hawk other services. This calls for efforts and investment to intensify capacity-building to create more trainers and better field staff.

 

IN A NUTSHELL

 

—BCFI may go solo, or team up with the Payments Council of India or the Fintech Convergence Council

 

—No category of firms categorised as non-banking financial companies: business correspondents (NBFC: BCs) but they intersect with the wider financial world

 

—Industry is concerned about the low and stagnant rates of commission for BCs

 

—Field agents are not sticking with the BC channel; many are being wooed by e-commerce firms