Business correspondent (BC) model was introduced with a view to transform the lives of rural population. The basic idea behind this model to be brought to India was to empower the unbanked and under-banked population by providing them with financial services at their doorsteps.
With the evolution of this model, a lot is expected to happen in the Indian banking scenario. Considering the size of our country and a large percentage of unbanked population, bank representatives extending financial services to people seemed to be quite an intuitive and reasonable approach. The challenges faced by banks to serve the villagers could now be reduced through agents and business correspondents.
Statistics suggests that 40% of the Indian population still remains unbanked as on Jun ‘16 and over 167 million people are not owning formal bank accounts even until Nov ‘16.
Though the journey of BCs has been full of barriers due to limiting regulations and scope, it stands firm on the promise to deliver the best. With Pradhan Mantri Jan Dhan Yojana in place, banking facilities have spurred in opening 28.38 crores new accounts (Apr ‘17) and BCs have highly contributed in making the dream of providing banking facilities to every single Indian household come true. The government has been rewarding incentives of INR 5,000 to BCs encountering viability issues in remote areas.
However, in order to make BC model a success, it is imperative for banks to address these 5 key concerns.
When banks choose their business correspondents, they may be either small institutions, NGOs and panchayats or even individuals. They may run side businesses or would be employed elsewhere simultaneously. So, they must be made clear that the key stakeholder in this model will be the bank. This means all the credit decisions, approval for loans etc. will remain in the hands of their banking partner. They must abide by all compliances, regulations, documentary requirements and KYC norms as structured by banks.
Roles and responsibilities
The BCs must be aware that the customers will be jointly served by two entities – an agent/agency being the face of the bank and the bank itself. They must serve the customers by giving them complete information about the investment options, new products and other necessary details. They must be adept in handling their grievances, if any, and educate them on mobile and other banking platforms.
BCs must build a rapport with the customers to effectively enable doorstep banking. They may encounter situations when they have to gain a customer’s trust on how they bring the banks closer to them. They’ll have to dedicate some extra efforts to explain the products and services offered and how they can benefit the clients. This is critical in meeting the customer expectations through this model.
Business correspondents must embrace technology. The amount of new and existing customer data shared between the agents and banks needs to be managed through robust technological solutions. It is important to maintain accuracy, reduce processing time and enhance productivity.
The agent bankers must be made aware of the reward programs ensuring they are engaged and motivated. Any transitions that occur must be communicated to them to continuously receive positive or negative feedback directly from the customers and the agents themselves. Banks must invest their time and efforts to ensure they are driven for meeting overall organizations goals.