BC body pitches for IBA-led reforms for fast-growing banking channel

BCRC has sought an IBA standing committee to address BC remuneration, penalties, grievance redressal, and customer service standards under the RBI's draft framework

The Business Correspondent Resource Council (BCRC) wants the Indian Banks’ Association (IBA) to lay down the ground rules for the business. The business correspondent (BC) channel is the world’s largest boots-on-the-ground channel, with 2.5 million agents in the field.

 

BCRC wants an IBA standing committee to look into a gamut of issues — remuneration of BCs, penalties, scaling up the channel to cross-sell more services and products, technology upgradation, and the setting up of a depositor education fund.

 

The industry’s self-regulatory organisation — BCRC — formally conveyed its suggestions after the Reserve Bank of India (RBI) proposed draft norms on branch authorisation and the use of BCs. The new framework classifies BCs into two categories — Business Correspondent-Banking Outlets (BC-BOs) and Business Correspondent-Banking Touchpoints (BC-BTs).

 

The RBI’s draft also gains urgency as the National Strategy for Financial Inclusion: 2025-30 (NFIS: 2025-2030) observed that a fair and reasonable remuneration structure for BC agents is a must to ensure quality and consistency in the delivery of financial services at the last mile. The NFIS: 2025-2030 sets December 2026 as the target deadline for IBA on the action point, strengthening the remuneration structure of BCs.

 

A senior BC industry official pointed out that despite repeated requests, an IBA Standing Committee has not been constituted. No timeline or composition was prescribed. BCRC requested that RBI use its influence so that such a committee is set up with adequate representation given to BCs, and that a dedicated grievance redressal mechanism be established with a 30-day response timeline and recourse to the RBI ombudsman.

 

The industry wants the IBA Standing Committee to conduct a cost-of-operations study before setting benchmarks. It also wants a standardised customer satisfaction measurement framework (survey methodology, frequency, sample size, scoring) with full transparency and a right to dispute. On specific grievance issues, BCs want a designated Grievance Redressal Officer at each bank, a 30-day response timeline, and escalation to senior management with ultimate recourse to the RBI ombudsman or equivalent forum.

 

Another BC pain point is penalties. Penalties should only be imposed if the deficiency is clearly defined, established through a fair process, and BCs are given written notice and an opportunity to respond. Furthermore, all liabilities in “bank-BC agreements must be specific, proportionate, capped, and based on proven crystallised loss. Unlimited liability without proven loss must not be permitted.”

 

It may be recalled that an all-India survey conducted by the central bank on BCs during January-March 2024 observed that this ecosystem was marred by a significant proportion of inactive BCs. Their distribution was skewed in many places, as they tended to congregate towards market centres or bank branches. This compromises the need for equitable access for people and leads to a lack of access in remote areas. Insufficient and untimely remuneration was observed as a major reason for inactivity, service apathy, and certain unscrupulous practices among BCs. The lack of a fixed component in remuneration as a constraint was highlighted by several BCs during the survey.

 

The talking points

• BCRC is for an IBA standing committee to look into a gamut of issues — remuneration of BCs, penalties, scaling up the channel to cross-sell more services and products, technology upgradation, and the setting up of a depositor education fund
• The IBA Standing Committee has to conduct a cost-of-operations study before setting benchmarks
• The demand is also for a standardised customer satisfaction measurement framework and a right to dispute
• On the specific issues of grievance, BCs want a designated Grievance Redressal Officer at each bank, a 30-day response timeline, and escalation to senior management with ultimate recourse to the RBI ombudsman or equivalent forum
• The draft RBI framework classifies BCs into two categories — Business Correspondent-Banking Outlets and Business Correspondent-Banking Touchpoints
• The BC channel is the world’s largest boots-on-the-ground channel, with 2.5 million agents in the field
• An all-India survey conducted by the central bank on BCs during January-March 2024 observed that this ecosystem was marred by a significant proportion of inactive BCs