agent s of f i nanc i a l i nc lu s i on
53
as a key driver of the push for financial inclusion, the
banks inevitably relied upon TSPs who were required to
provide the hardware and software for the ICT applica-
tions necessary for economically viable operations. The
TSPs also got involved in field operations, either directly
or indirectly—often through their own financial services
affiliate companies or through other support organiza-
tions managing networks to field BC agents or customer
service providers (CSPs)
2
to deliver services to the rural
clients.
As a result rather than individual BCs linked to a rural
bank branches to assist in last mile service delivery, there
emerged a whole superstructure of stakeholders with
varied tasks and roles. Since the opening of no-frills ac-
counts (NFAs) was the first step in the process of BC
participation it effectively started with a non-financial (or
BF) function, undertaken by the BC agent or customer
service provider (CSP). It was only when accounts be-
came operative and transactions effected in them (which
was a challenge in itself ) that the CSP would perform
the true BC role involving financial functions and cash
handling. The distinct category of BFs with more limited
functions virtually disappeared and became subsumed
within the BC terminology. Thus there was a significant
difference in the focus of the main role and activities
of the BCs when they were conceived in 2006 to what
emerged several years later. While partner MFIs were
also seen as key to the financial service delivery (mainly
credit) the BC role became one of opening accounts and
facilitating transactions and government payments to the
clients, with virtually no involvement in lending opera-
tions. However, in recent years there has been a revival
of bank partnerships with MFIs acting as BCs which use
their client base and infrastructure to deliver credit and
also savings and other services. At the same time in many
cases the BC structures built up by corporate BCs in sup-
port of banks have proved to be unwieldy and given way
to the direct relationship between the bank and individ-
ual BCs. Further, new types of agencies have emerged to
take up the BC role and others such as NBFC-MFIs that
were earlier debarred have been allowed to enter. Thus
BC structures and agencies and their role and functions
have been undergoing a transformation over the years
resulting in an abundance of models and types.
With the introduction of the FIPs the penetration of
banking services in the rural areas has increased to a great
extent. As seen from Fig. 3.1 below, apart from 46,126
banking outlets, branchless banking connectivity had
been extended to 337,678 villages by 31 March 2014,
through BCs deployed by banks. When compared with
31,574 BC outlets as on 1 April 2010 at the beginning of
the 12th five-year plan period, this represents a phenom-
enal ten-fold increase with four years. However, this sta-
tistic does not in itself convey the range of developments
and issues surrounding BC outreach and relationships.
3.2 THE BC CHANNEL: VIABILITY OF
STAKEHOLDERS AND RELATIONSHIPS
There have been a large number of studies that have
examined the functioning of the BC model. Microsave,
in particular, has over the years participated in extensive
research on various aspects of BC operations, particu-
larly related to costs and margins available to BCs and
the viability and sustainability of the BC networks. The
findings of Microsave studies have been reported in the
Microfinance State of the Sector Reports
2012 and 2013.
These studies covered pricing structures in revenues and
costs of the BC models, and the commission structures.
They highlighted the need for sustained earnings from
transaction-based revenues and the need for diversified
products to ensure the stability and diversity of revenues.
Other major studies too confirmed apprehensions about
the viability of the BC channel. A Sa-dhan study on the
efficacy of the Banking Correspondent Model (Sa-dhan-
CitiFoundation, 2012) too had highlighted the following
shortcomings: (i) the unviable cost structure; (ii) the lack
of commitment of banks; (iii) the absence of financial lit-
eracy; (iv) a lack of knowledge between customer service
operators (CSPs) and clients; and (v) lack of a grievance
redressal system.
3.2.1 CAB-CGAP Surveys
An important recent source of information and learning
of the status of BCs in implementing financial inclusion
in India has been the national surveys of BCs jointly
undertaken by CGAP and the College of Agricultural
Banking (CAB). The first survey covering 860 CSPs was
undertaken fromMarch–May 2012 (CAB-CGAP Survey
2013) in 11 states with higher reported financial inclu-
sion coverage. The survey tried to contact 1,030 CSPs
