i nc lu s i ve f i nanc e i nd i a re port 2014
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distance travelled from 1 km for manual payments to
0.57 km for electronic payments. The recipients were,
however, found to be passive users of technology as their
transactions were always mediated by BC agents.
Overall the business case for CSPs was found to be
weak. Women agents disbursing MGNREGA and pen-
sions received about Rs. 1,200 for 10 days’ work—lower
than the minimum wage rate. Similarly, for every Rs. 100
disbursed the bank received Rs. 2 as service fee, whereas
the bank-BC models had a cost of Rs. 2.65 to Rs. 2.93.
These costs were net of revenue earned from float income.
The Department of Post relied on branch postmasters to
distribute payments and utilized its existing infrastruc-
ture of cash management and storage. Nevertheless, its
costs of disbursing Rs. 100 were Rs. 3.24. However, this
system provides greater flexibility and can also provide
agents to carry out disbursements similar to BC agents.
Through this hub and spoke model, the Department of
Post can bring down the costs of disbursing to Rs. 2.46
per Rs. 1,000. Accordingly, based upon the experiences
in Andhra Pradesh, commission rates of 3 per cent (with
3.5 per cent in remote areas) would be necessary to make
the BC channel viable for banks and agents. This would
be in line with global trends on service commissions to
banks. To integrate this channel with financial inclusion
objectives, banks and agents would need to be incentiv-
ized to offer financial services alongside government
payments.
3.3 BC MODEL: SUMMARY OF
CURRENT STATUS
To sum up, in a presentation on building viable agent
models, Microsave (2014), the leading researcher of BC
agent networks, provided evidence on the status of agent
networks in India and recommendations for the future.
13
Piecing together the evidence from government data and
its own studies, it showed that the true reach and quality
of the branch and agent network of banks was poor and
characterized by very low levels of activity. Microsave field
research further showed that a large number of BC agents
complained about lack of support for their activities, the
low revenue from their operations and the recoveries of
operating expenses by the network managers regardless
of the level of the revenue generation. However, where
the BC models were focused on anchor products such
as remittances, urban, and even rural, BC networks were
becoming stable and even profitable. Similarly, where
agents enabled a wider mix of products (credit services,
involving leads as well as recoveries, along with savings)
and received support from the bank branch, BC earnings
were nearly five times higher than the average. Similar
findings were also reported in a NABARD study of
viability of BCs in RRBs (Box 3.5).
The majority of rural agents/CSPs were struggling to
stay in business even while delivering G2P programmes
with assured volumes thus failing to ensure sustainability.
CSPs who received a minimum income- and transaction-
based incentives were more motivated to continue. The
choice of technology affected the total CSP investment
and operational expenses. The mobile-based model had
the lowest capital and operational expenses out of all
models, including kiosk and point of sale (PoS) devices
and was the technology of the future.
The perspective from a range of BC institutions was
that 50 per cent of BC operations were not able to
cover costs, 20 per cent barely able to cover costs and
30 per cent beginning to make profits, while none were
B
OX
3.4
Is Aadhar Mandatory?
The Pradhan Mantri Jan-Dhan Yojana (PMJDY) is
committed to deploying the 12-digit biometric Aadhaar
number project. As per the PMJDY brochure Aadhaar
number will be seeded to make accounts ready for DBT
payment and that they are to be the single point for
receipt for all DBT. However, the Aadhar project is in
itself controversial, legally contested, disapproved by the
Parliamentary Standing Committee on Finance and ordered
to be not mandatory for public services by the Supreme
Court. The Supreme Court has passed an interim order
on 23 September 2013 stating that availing of no public
services can mandatorily be linked to Aadhaar. On 24
March 2014, the Court restrained the central government
and the Unique Identification Authority of India (UIDAI)
from sharing data with any third party or agency, while
dealing with a case filed by Central Bureau of Investigation.
While the Aadhar requirement for opening bank accounts is
being routinely implemented by banks and related agencies
it is not clear how Aadhar can be made mandatory in DBT
and financial inclusion programmes.
Source
: Adapted from Krishna (2014).
