IBA to set up committee to review BC payouts, fixed remuneration on cards

Move follows NFIS 2025-30 observations and RBI survey findings flagging inadequate and delayed remuneration as key reasons for inactivity among Business Correspondents

With the extensive Business Correspondents (BCs) network under stress for some time now, the Indian Banks’ Association (IBA) is looking to set up a committee to review the remuneration paid to BCs.

 

The National Strategy for Financial Inclusion 2025-30 (NFIS 2025-30) report has observed that a fair and reasonable remuneration structure for BC agents is critical to ensure quality and consistency in the delivery of last-mile financial services.

 

The new commission structure payable to BCs may be tiered depending on the services offered, but a floor compensation may be prescribed at ₹5,000 per month without linking it to account opening and/or transactions, said sources in the BC industry.

 

Suggestions made by the C S Setty sub-committee on BC-related issues in September 2021 are also expected to be back in play. An all-India survey conducted by the Reserve Bank of India (RBI) on BCs during January-March 2024 observed that the ecosystem was marred by a significant proportion of inactive BCs. Their distribution was skewed in many places because BCs tend to concentrate around market centres or bank branches. This compromises the need for equitable access and causes 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 of remuneration as a constraint was highlighted by several BCs during the survey.

 

“There are now three moving parts towards a revised BC remuneration structure. The IBA committee, the observations made in the NFIS 2025-30, and the National Institute of Bank Management’s (NIBM’s) study on BCs,” said an industry source. The NIBM report is yet to be made public.

 

As V R Das, former executive director, RBI, views it, the BC model was envisaged in 2006 to scale up financial inclusion and enhance banks’ outreach. “Since then, the situation has changed dramatically. Today, you have technology on a scale which was not available back then and the number of people with bank accounts has risen significantly,” he said. However, he conceded there could still be last-mile problems for people in accessing services due to distance from a bank branch.

 

“The BCs can also be instruments for promoting banking products and services and financial literacy, providing guidance and support for grievance redressal. So, the BC model may need some degree of reimagining after an important role played over two decades. It continues to be relevant,” he said.

 

“The BC model, thoughtfully designed by the RBI, proved outreach works. For Viksit Bharat, we must reimagine BCs as interoperable digital public infrastructure: empowering providers to access the next 90 per cent. Artificial intelligence-enabled, first-mile touchpoints can deliver unbiased financial inclusion at scale, ensuring efficiency, viability and true nationwide access,” said Anand Kumar Bajaj, founder, managing director and chief executive officer (CEO), PayNearby.

 

The Report on Trend and Progress of Banking in India, FY25, says the number of basic savings bank deposit accounts (BSBDAs) increased by 2.6 per cent to 72.4 crore at end-March 2025, while the aggregate balance in these accounts increased by 9.5 per cent to ₹3.3 trillion. BSBDAs raised through BCs stood at 4,491 lakh accounts and the amount was just over ₹1.74 trillion. In comparison, the same via bank branches was 2,751 lakh accounts and ₹1,54,028 crore.

 

“As India’s financial inclusion mission in villages rests firmly on BCs, a viable network at the last mile is critical. The NFIS 2025-30 has set December 2026 as the target deadline for IBA on the action point: strengthening the remuneration structure of BCs. The crux will lie in banks implementing the recommendations. So, we should begin to see results thereafter,” noted Sumita Kale, CEO and senior fellow, Indicus Foundation.

 

The changes ushered in by the RBI include Know Your Customer (KYC) norms under the Prevention of Money Laundering (PML) Act, 2002, to prevent the misuse of financial systems for illegal activities such as money laundering, terrorist financing and fraud. The banking regulator also amended KYC Directions, 2016, to enhance consumer protection, streamline compliance and address evolving operational challenges in KYC management.

 

Other changes include permitting banks to leverage BCs for KYC updates, and mandating regulated entities (REs) to issue three advance intimations (including one physical letter) before the KYC due date and three reminders post due date. Besides this, the central bank allowed extension of KYC update deadlines for low-risk customers to June 30, 2026, or one year from the due date, whichever is later. It is likely to benefit stakeholders by reducing customer dependency on bank branches through the use of BCs, improving transparency, and ensuring timely compliance while minimising disruption for low-risk customers.

 

Why is BC remuneration critical for financial inclusion?

BCs are the operational backbone of the financial inclusion architecture: originating and servicing Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, enabling direct benefit flows, Aadhaar-enabled payments, micro-insurance and pension distribution at the last mile. “Focusing on AI-driven efficiencies and workflow automation — streamlining onboarding, transaction monitoring, cash management and upskilling of BCs to manage the product portfolio offered by banks — can materially lift productivity, reduce leakage, and structurally improve unit economics for both banks and the BC agents themselves,” said Seema Prem, co-founder and CEO, FIA Global.

 

“We must relook the BC model from the framework of a Digital Public Infrastructure that is interoperable in the true sense and solves the ‘access challenge’ for multiple providers,” said Bajaj, arguing that a digitally equipped “first-mile touchpoint” can uplift the country into the next orbit of Viksit Bharat sooner than planned. With interoperability permitted for BCs, the infrastructure can be optimally utilised by multiple providers and bring cost efficiencies and viability.

What are the key developments on BC remuneration?

On the cards

• An all-India survey conducted by the RBI on BCs during January-March 2024 observed that the ecosystem was marred by a significant proportion of inactive BCs
• The survey held that remuneration was observed as a major reason for inactivity, service apathy and certain unscrupulous practices among BCs. The lack of a fixed component of remuneration as a constraint was highlighted by several BCs
• BC industry sources surmise that the new commission structure payable to BCs may be tiered depending on the services offered, but a floor compensation may be prescribed at ₹5,000 per month without linking it to account opening and/or transactions
• There are now three moving parts towards a revised BC remuneration structure: the IBA committee, the observations made in the NFIS 2025-30, and the National Institute of Bank Management’s (NIBM’s) study on BCs. The NIBM report is yet to be made public