 "Almost two decades after business correspondents (BCs) arrived on the scene, the lack of grease is evident. Poor payout for the heavy lifting they do is is making the channel – a key cog in the financial inclusion wheel – creaky. For there has been n")
Business correspondents (BCs) have sought a meeting with the Ministry of Finance (MoF) to break the deadlock over the remuneration paid to them. particularly in light of pressure from banks to raise deposits.
“We are being seen as extension counters of banks. The remuneration paid to us has to be revised for the BC channel to be viable," an industry source said, on condition of anonymity because negotiations are still ongoing.
The credit-deposit (CD) ratio of banks - the percentage given as loan(s) for every Rs 100 in deposits – had reached as much as 90 per cent during calendar year 2024. In the case of some banks, it was well over 100. This has now inched lower to under 80 per cent.
According to the 'Report on Trend and Progress of Banking in India (FY24)', basic savings bank deposit accounts (BSBDAs) activated through the BC mode surpassed those through physical branches, indicating the effectiveness of the BC model at the grassroots level. The data runs counter to the popular view that deposits are primarily led by branches.
Given the switch in deposit-raising primacy, the Business Correspondent Resource Council (BCRC) has raised issues concerning the sector with the Parliamentary Committee on Finance with a request to set up a Remuneration Review Committee comprising the Department of Financial Services (DFS), Reserve Bank of India (RBI), National Payments Corporation of India (NPCI), trade bodies, and banks. The industry body has asked for a minimum guaranteed commissions in high-difficulty geographies such as the North-Eastern states, hilly terrains, and villages with population under 3,000.
It has been suggested that the commission structure be linked to the Consumer Price Index (CPI) to create a transparent and scalable formula for periodic adjustments across services and geographies. Additionally, there is a demand for a minimum fixed allowance /incentive Rs 5,000 for BCs without linking it to account opening and/or transactions.
While the remuneration issue was raised by both the BCRC and the Business Correspondent Forum of India (BCFI) at the monitoring committee meeting on the functioning of BCs held on January 21 this year, a follow-up meeting is now being sought. Incidentally, at the January meeting, it had been decided that a working committee would be formed to address all issues, and would be headed by one of the managing directors of the State Bank of India (SBI) with members drawn from Yes Bank and the BCFI.
Last November, BCs also voiced worries on the viability of this banking channel in a meeting with the Minister of State for Finance Pankaj Chaudhary. During the talks, problems highlighted by the working group set up under the chairmanship of C S Setty in December 2022 were raised. Setty, who is currently chairman of State Bank of India, was the bank’s managing director at the time.
