f i nanc i a l i nc lu s i on i n i nd i a
27
Management Systems followed by banks, wherein BCs
are required to fully pre-fund their business operations, in
terms of cash limits and security provided; non-insurance
of cash held in transit by BCs; low or untimely remu-
neration paid to BCs; and allowing transaction only in
limited products through the BC channel. Commitment
on the part of banks and standardization of practices, for
instance, of BC operations, are necessary for the success
of the multifarious efforts to reach out to the margins of
financial markets.
2.2.2 Bankers’ Views
Though there is speculation about the enthusiasm of
bankers for financial inclusion, little is written about how
bankers themselves feel about the initiatives. A Round
Table of about 35 bankers from public sector and private
banks and RRBs convened by NABARD and ACCESS
Development Services in Mumbai in July 2014 provided
responses from the banks on a range of issues. The Chair
of the Indian Bank Association exhorted banks to relook
at their models and have a sense of ownership of the
business of the BC agents. He highlighted the opportunity
provided by DBT payments being routed through the
banking channel and expressed the hope that operating
expenses of banks, in the provision of services, will come
down substantially, with scaling up. He advocated a
mix of stationary and mobile BCs, as the latter had not
proved to be very effective in providing doorstep services.
The retention of Aadhar was a positive development,
which would give a boost to financial inclusion. At the
same time, the overdraft of Rs. 5000 on RuPay cards
constituted an added challenge that ran the risk of
creating over-indebtedness. It is clear that the industry
cannot afford to have 70 per cent of accounts opened
under financial inclusion to be dormant, leading to non-
viability of BC agents.
4
Hence banks have to find the
solution in the form of a scalable and replicable business
model to stimulate the demand side. It was generally
agreed that strengthening of functioning of FLCCs is
very important for the progress of financial inclusion. As
a result, the FLCs were proposed to be introduced at the
block level instead of at the district level.
Bankers’ generally expressed the view that there was
no reluctance on their part to implement the financial
inclusion measures which they considered to be desirable
and potentially profitable but needed time for viable op-
erations. As volumes would pick up in the accounts with
the provision a greater number of services, operational
expenses would come down and this would ensure the
profitability for the BC and for the banks. The outsourc-
ing of bank functions was necessary in the interests of
servicing the growing market for financial services as
bank branches would not be able to take the load of the
burgeoning customers. However, it was also felt by some
bankers that services to bank clients should be priced
such as to cover costs that which the latter were prepared
to pay.
It was pointed out that kiosk banking or similar
ultra-small branch or common service centres (CSCs)
would be more appropriate than merely deploying BC
agents. A mix of approaches would be necessary. While
BCs were useful for de-cluttering of busy branches,
through reduction of footfalls, they also helped to save
transaction costs of banks. However, BCs were not avail-
able in difficult areas, and they were found to be viable,
as also profitable for the BC, in the event of an active op-
eration in remittances. Some of the larger banks had had
a mixed experience with various types of BCs, starting
with individual BCs linked to bank branches. The nega-
tive experience with these agents gave way to relying on
corporate BCs, but these in turn had their shortcomings,
with their limited field knowledge and poor management
of BC agents. Since the bank’s name was involved, the
process of selection of the local BC interfacing with the
clients and the monitoring of the BC’s operations was
very important.
A wide variation was also observed in the remunera-
tion paid to the BCs. This ranged from a minimum of
Rs. 1,500 per month for 25 accounts or 50 transactions,
going up to Rs. 5,000 in some cases.
5
At the same time
the banks had several grievances with the BC arrange-
ments. As regards the role of corporate BCs, banks as
well as NABARD were dissatisfied with the functioning
of corporate BCs, as also the fact that in the case of some
of them, the technology used was not appropriate. Banks
were facing challenges of connectivity, especially in the
PoS model. Some banks were working with as many as
31 TSPs as corporate BCs and every TSP had a different
technology. In the Request for Proposals (RFP), contracts
were awarded to L1 bidders, but their performance was
poor. It was felt that it would be better if a technical com-
