Business Correspondents (BCs) have sought a fair compensation for the financial inclusion work they do at the grass roots level, including implementation of a 1 per cent commission structure based on available balance maintained in customers’ bank accounts and fixed commissions for operating in rural and challenging areas.
Further, they want a dedicated pricing committee to be set up to review and adjust BC commission rates annually.
The Business Correspondents Resource Council (BCRC) has made a plea in this regard to the finance ministry and banks. Business Correspondents (BCs) are retail agents engaged by banks for providing banking services at locations other than a bank branch/ATM.
Dharanidhar Tripathy, CEO & Director, BCRC, observed that BCs play a pivotal in advancing financial inclusion in India, accounting for about 84-85 per cent of the 54.66 crore Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts opened so far and facilitating a significant portion of India’s rural banking transactions,
Despite their crucial role, BCs face several challenges, including outdated commission structures, rising operational costs, and limited earning potential, making it difficult for them to maintain operations and offer quality service to underserved communities, Tripathy said.
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He emphasised that addressing these challenges through targeted reforms is necessary to ensure the long-term sustainability of BCs and accelerate financial inclusion in the country.
The BCRC chief noted that BCs face limited earning potential once they reach a plateau in new account openings and transaction volumes in their area of operation.
“Convincing customers to maintain higher balances requires significant time and effort. When successful, this effort leads to a large deposit base for the bank, contributing to higher profitability through an increased net interest margin (NIM).
“Therefore, compensating BCs by implementating a 1 per cent commission structure based on the available balance would reward them for their critical role in fostering savings and building a stable deposit base for banks” he said.
Fixed commission
The BCRC wants fixed commissions for BCs operating in rural and challenging areas, which typically experience low transaction volumes, making it difficult for the Correspondents to sustain their operations.
“A fixed commission would provide BCs with a baseline income, ensuring their continued engagement in underserved areas. Suggested fixed commissions include ₹4,000 for centres in the Northeast Region (NER), ₹3,000 for centres in Left-Wing Extremism (LWE)-affected areas, and ₹3,000 for villages with populations under 2,500,” Tripathy said.
Further, the stipulation of minimum number of transactions and accounts opening per month to be eligible for incentives should be waived as in difficult centres daily transactions are affected. Moreover, account opening in many areas has almost reached a saturation level.
The BCRC chief noted that Bank Mitras, who are engaged by corporate BCs, form the backbone of financial inclusion and serve as banking agents, commuting to far flung areas and villages to enrol people, and deliver financial services. However, rising inflation, fuel prices and reducing fees have increased BCs operational burden.
Therefore, a dedicated pricing committee is needed to review and adjust BC commission rates annually. This committee can ensure that the rates remain aligned with economic conditions, inflation, and the evolving needs of the banking sector.
