The welfare and economic growth of a nation is highly dependent upon the accessibility of its citizenry to financial products and services. While all the entities in the banking sector are making tremendous efforts to bring every sector into the fold of formal financial services, a significant gap still exists between the implementation and the actual ground reality. In this note, we talk about the Business Correspondent (BC) network in India that has become the backbone of the last mile financial service delivery across urban and rural centers. 

In India where less than 15% of villages have a brick-and-mortar bank branch, BC agents are the only transaction point in many of the remaining villages. COVID-19 has magnified the importance and agility of this network. With close to 8 lakh active agents, catering to approximately 34 crore people in face to face transactions, the agent network has become indispensable in the current scenario. 

Following the nation-wide lockdown, on the 27th of March 2020, The Government of India announced a 1.7 lakh crore relief package as a part of the Pradhan Mantri Garib Kalyan Yojana, for the vulnerable communities to minimize the difficulties faced by them amidst the lockdown. In order to ensure timely and hassle-free payments to the beneficiaries, these BC outlets were classified as an essential service, implying that these outlets have been open to serve the unbanked areas. An on-going MicroSave Consulting (MSC) research shows that the footfall of customers at these BC outlets has increased (almost doubled in some instances) in the Aspirational Districts. 
These Aspirational Districts  have been identified as pockets of under-development across the country and the Government of India is implementing a programme to ensure their rapid transformation. Anchored by NITI Aayog, the Aspirational District has been instrumental in breaking the vicious cycle of low development and low motivation in the 112 under-developed Districts of India.

In such times BCs are taking immense risk in providing financial services, especially owing to limited access to resources to ensure safe and smooth operations. While the citizens appraise the efforts of BCs, their struggles and hardships go unnoticed.  

Agents are providing services in far flung unbanked areas. Due to limited mobility of people during the lockdown, access to financial services has suffered in unbanked villages where usually beneficiaries have to travel upward of 5kms to reach an agent point. District administrations have placed the responsibility of providing financial services in such villages on BC agents. In Nandurbar (Maharashtra) and Sonbhadra (Uttar Pradesh) districts for instance, some agents have taken up these additional responsibilities. They travel periodically to designated panchayats to provide cash-in cash-out services. This has led to an increase in travel expense, increased trips to the bank branch for rebalancing cash floats and loss of opportunity to cater to customers visiting the agent kiosk. 

With increased footfall (despite the staggered DBT payment plan), overcrowding is a real challenge and it poses greater risk of infection as well as security. Ensuring social distancing and hygiene protocols has become cumbersome, but essential for the BC agents. Numerous guidelines for customers queuing at agent points to access their government payments have been issued by banks and the district administration. While agents are using disinfectants to sanitize the biometric authentication devices, not all of them are well-equipped to handle the crowds. The administration of aspirational districts Bahraich (Uttar Pradesh), Dhubri (Assam), Kalahandi (Odisha), Sheikhpura (Bihar) among others, have taken extraordinary steps in providing agents with police support. But, in most instances, agents have to fend for themselves and use volunteers or hire additional help to ensure social distance and hygiene protocols are followed by customers. Along with the regular over-heads such as rent and electricity, agents are incurring costs of hiring additional support at kiosks, for buying masks and sanitizers and increased rebalancing trips to the bank.

Health risks to agents are real. On an average, BC agents are interacting with 80-100 beneficiaries per day, making them extremely susceptible to the Coronavirus, along with scores of beneficiaries. In the eventuality of an infection, the agents’ source of livelihood will be at risk. In contrast to health workers (ASHA and Anganwadi), very few of these agents have insurance cover. 

At a time when everyone from the government to banks are hailing the extraordinary efforts of BC agents, we believe it is critical that banks and BCNMs offer them greater support to service the last mile.  Ensuring agents’ motivation and providing support is important. If agents were to shut shop, banks will be unable to handle the added pressure of customers. For instance, Khillod block of Khandwa has a population of over 48,000. Currently, the block is serviced by one bank branch and several BC agents. If all BC agents were to shut down, the bank branch will not be able to handle the surge of beneficiaries wanting to withdraw money. We estimate that without agents, approximately 4,000 beneficiaries will line up at the branch each day, in this block alone!

We list a few  focus areas that  should be taken up for the welfare of agents. Across all these areas, there are initiatives already being taken by some banks, but there is a need to standardise and scale these efforts so the entire agent network gets requisite support. We also cite examples from the field on what has worked in a few Aspirational districts and can be replicated in other districts. 

1.    Concerted efforts to manage liquidity and security 
Kursakanta block in Araria (Bihar) for instance has 28 BC agents catering to a population of 149,231, with only two bank branches in the block. Large scale withdrawal transactions means that agents run out of cash frequently.  This hampers rebalancing needs even during regular days, making these times of high cash withdrawals especially difficult to manage. In this context, two practices are helpful and should be enshrined in policy by all banks:
a)    Banks and BCNMs must extend additional float / overdraft limits to agents. Some banks, for example, the Central Bank of India have allowed OD limits/float limits (for up to Rs. 100,000).
b)    A few bank managers make it easier for agents to withdraw cash at the branch. Priority service ensures that agents are back at their kiosk faster.

In different Aspirational Districts, the administration has asked police to support agents and provide them security as per their needs.. In Goalpara (Assam), the district administration has roped in members from Civil Defense Volunteers and Nehru Yuva Kendra. Other districts should also rope  in Civil Society organisations to assist them in managing security at agent point.

2. Incentives to motivate agents 

There have been a variety of incentives and grants that several banks have provided to their BC agents. Some banks have offered agents a one-time payment to cover the costs of protective gear such as sanitizers and masks. For instance – the Maharashtra Gramin Bank has provided Rs. 2,000 to allow agents to purchase masks, sanitizers and gloves. The State Bank of India, UCO Bank, Bank of Baroda have also announced similar incentives. Some banks have also announced additional payments as incentives – for example the Bank of Baroda pays INR 100 each day the agent is active to help cover the cost of transport for rebalancing. Similarly, some banks are providing insurance cover to agents. For example, the Bank of Baroda has provided a health cover of INR 60,000 and ex-gratia payment of INR 10 lakh in case of loss of life to each BC agent.

While these incentives are helpful, different banks have adopted different policies. This also includes scenarios where a bank may not extend any incentives to agents at all. Given that eventually, all agents are providing similar services and are crucial in the efforts of the government to provide ‘near-by’ banking services, some level of uniformity in the support/incentives being provided to them is essential. It is also imperative to note , the incentives currently on offer are for a limited duration. Incentive packages must continue while the health emergency continues.

This might also be a great time to revisit and restart old but relevant debates centered on increasing commission rates for processing government payments and hence improving the viability of agents. MicroSave Consulting (MSC) ANA India report in 2017 found that agents’ revenue ranged from USD 2 to USD 770 (ranging approximately from Rs. 150 to Rs. 58,000). While the top earners might be earning in six digits, there are agents who are still on the poorer side of 3 digit income. Low commissions coupled with low footfalls have resulted in agents having to shut shop in many rural areas, especially in the aspirational districts. 

3. Given that many users are uneducated, biometric authentication becomes a necessity. There is however, a need to drive non-touch authentications that may work for uneducated people. For instance, IPPB has retained the OTP option for authenticating transactions at the last mile. Another way to limit transmission would be to forgo agents’ fingerprints before every transaction. QR codes could be leveraged for both, to identify customers (similar to merchant QR codes) and to conduct transactions. Near-field-communication, facial recognition and/or or voice authentication can be tested.

4. The transactions carried out by BCs have amplified during the lockdown. This has put an added load on bank servers; there are multiple instances of interrupted transactions due to such server down-times. In this case, instant grievance resolution support should be provided to the agents seamlessly. Options around leveraging the bank customer support, effective communication to the customer for assuring safety of their money should be explored. 

5.  Lastly, agents would appreciate proactive support by managers of banks and BCNMs. Agents are under pressure and are putting in extra hours to keep up with increased footfall. Line managers’ empathy and encouragement will help maintain their motivation. Some empathy will go a long way in establishing good-will with these workers at the front line for financial service delivery. 

In spite of all the difficulties in these grim times, BC agents are working assiduously to ensure that the poor do not suffer. The competent government authority and banking infrastructure needs to identify ways to incentivize the additional work, and travel that agents are having to do. Insuring agents (with adequate cover) and providing them with security will enable them to discharge their responsibilities. This would not only ensure that India is better prepared for any impending National Emergency, but would also ensure higher levels of financial inclusion on a consistent basis across the country. 

About the authors:
Anveshi Gupta is a Young Professional with NITI Aayog. She is working with the Aspirational Districts Programme.

Ishita Sharma, Mimansa Khanna, Saloni Tandon are part of the MicroSave Consulting team. MicroSave Consulting is NITI Aayog’s development partner for enhancing Financial Inclusion outcomes in Aspirational Districts.

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