The business correspondents (BCs) model, which was encouraged by the Reserve Bank of India (RBI) to promote financial inclusion in the country, is facing many challenges, according to a study by Sa-Dhan, the national association of community development finance institutions.
The study, which focused on financial inclusion models including self-help group-bank linkage, microfinance institutions and BC model, pointed out that the BC model currently required urgent intervention to sustain.
The shortcomings for the BC model are the cost structure, bank’s lack of commitment, absence of financial literacy, lack of knowledge between customer service point operators (CSPs) and clients and lack of grievance redressal system.
BCs & CSPs operating from rural areas are struggling to generate volumes, while they are making money on an average of Rs 10,000 per month in the urban areas, the report added.
“The BC model is new to banks as outsourcing banking activities is a new concept in India. So, we are seeing a lot of resistance towards BC and CSPs at the ground level,” said Amiya Sharma, chair, Sa-Dhan.
The report pointed out that improvement in connectivity and technical infrastructure is required to sustain the BC model and it should be considered for convergence with the national e-governance plan.
“The BC model, if modified and rolled out carefully, has the potential to usher in a second banking revolution in the country to achieve near total financial inclusion,” the report added.
