I recently visited Gangavaram Mandal of Chittoor District and interacted with Business Correspondents (BCs) of a public sector bank who were part of 2012 study titled Financial Inclusion: A Demand Side. These BCs were not active in 2012 for various reasons, but now are operational.

The informal interactions indicate certain discernible characteristics of the BC model. First is a remarkable change in the mindset of the customers which has led to greater acceptance as well as willingness of the community to transact through the BCs – especially when the service is reliable and always available. A similar acceptance of the BCs is visible in Kurnool District where a successful BC attests the increased inclination of the customers in the village to transact through the BCs. In places where the services are continuously available there is a marked preference to transact through the BCs rather than physical visit to a branch. A functional, reliable and accessible BC/customer service point (CSP)/banking outlet in the village invariably leads to a change in mindset of the customers: one that is underscored by depositing cash into the bank account rather than hold cash. A similar change is noticed due to increased confidence in a ‘Bank on Wheels’ associated with a Public Sector Bank in Mansa Taluk of Gandhinagar District in Gujarat. The ‘Bank on Wheels’ visits three villages each day at pre-announced timings and spends up to an hour in each village. In all the villages, immediate and hassle free access to the money in the account is of paramount importance for a customer rather than return on the money in the account.

As a generalisation, the preference to transact through the BC are motivated by three factors (a) the cost incurred to visit a branch, (b) problem of accessibility: rural branches are extremely crowded and by extension time consuming to complete a transaction and, (c) loss of wages due to the time spent on visiting a branch to complete a transaction. The efficient and glitch-free functioning of the BC/CSP model largely solves the problems for a rural customer hoping to transact in small amounts.

The causes that limit the BC model may be divided into two underlying reasons: (a) technology issues and, (b) unsatisfactory compensation model. These two causes continue to plague the BC model. A major constraint on the BC model is the inability of the banks and corporate entities to pay the promised compensation - commission or salary. The bank has introduced varied (slab) form of compensation based on transactions. A BC mentioned that the bank promised a salary of Rs.3000 per month. However, the payments are yet to materialise. This has an effect on account openings, with BCs completing only the bare minimum to meet their targets. A BC claims that in the past year he has helped mobilise nearly Rs.20 lakhs of deposits. This excludes a large deposit of Rs.25 lakh by an account holder and his family who sold their land. The BC continues to be choosy about the business since it is not remunerative. This leads to the BC often directing the customers to the bank instead of completing the transactions. Since, the BCs do not receive sufficient remuneration their activity is subject to availability of time on the part of the BC. The past forty days have been hectic for agriculture and hence a BC in Kalgatoor pointed out that he completed the bare minimum target for account openings and then turned his attention to his primary business.

An impressive feature is that in Melumoy Panchayat nearly 50% of the accounts opened by the BC are active. Customers now accept that it is better to deposit surplus cash in the bank and withdraw it when needed. This is a welcome cultural change and approach of the customers.

A major limiting factor on the growth of the BC model is the lack of technical support at hand when required, especially at short-notice - as in case of a problem with the PoS machine/handheld device. The Kalgatoor BC’s machine requires a repair and the branch has since despatched it to Chennai to get it repaired. This has led to stoppage in banking transactions in the village. The Bank may consider adopting a practice followed by certain other Public Sector Banks wherein the bank requires a technology provider to provide necessary technical support in each district. The request for service is raised by the link branch.

A useful feature that did not exist in 2012 is that the accounts opened by the BCs of the PSU Bank are interoperable –at the branch as well as at the CSP point. However, those customers who wanted to operate their accounts through the CSP were required to register themselves with the CSP and were issued a biometric smart card.

The trend clearly demonstrates that if provided with a reliable and convenient banking channel like a BC in their village, customers are willing to adopt banking services. The question however, remains, is how can the banks and the BCs together ensure that the service is uninterrupted, in order to win the trust and confidence of the customers?