Business Correspondents get the attention they deserve, finally!
Last month, in December 2021, the Department of Financial Services constituted a Working Group to go into the issues and challenges affecting the business correspondent (BC) ecosystem in India, using the Indicus White Paper on Direct Benefit Transfers as the background reference. The agent network proved a tremendous resource for welfare payouts during and after the lockdown in 2020. As per RBI data, by end-March 2021, more than 95% of the banking outlets in rural areas were operated by BCs. However, there are serious weaknesses in the system and the terms of reference for the Working Group include the specific recommendations made in our paper - ensuring adequate compensation to the BCs to keep the business viable by a comprehensive analytical and comparative costing exercise, greater focus on increasing the number of women agents in the field to improve access to women beneficiaries, differential commission charges for different kinds of agents, and revamping agent certification and training
However, while the Working Group has been tasked with taking feedback from the RBI and other stakeholders in the BC ecosystem, there are only large public sector banks as members. Representation from the RBI, private sector stakeholders with large number of agents on the ground and industry organisations like the Business Correspondent Federation of India would have provided the necessary and valuable perspectives from others working in the system.
In our March 2021 White Paper on the Agent Network, which details the challenges and makes recommendations, Anantha, Laveesh and I had set out two critical takeaways – one, that the time has come for increased granularity and differentiation – across geography, across agents, products and services, and across type and extent of compensation; and two - the government has to continue to play a proactive coordinating role and make stakeholders at all levels - DFS, RBI, Bank managements - see the bigger picture and grow the pie together towards facilitating a sustainable agent network. Without such coordination, each of these players will remain bound by their necessarily narrower objectives. Both these are now being addressed through this Working Group. The DFS has taken a big step forward. We look forward to wider consultation, taking all views on board, for a stronger network.
The RBI should take a cue out of this consultative approach as it deals with an increasingly complex and evolving payments and banking landscape. For instance, the recent regulations on recurring payments and card data storage have caused considerable friction in the payments space. As Ashish Aggarwal (VP and Head of Policy, NASSCOM) said in a recent webinar hosted by Nishith Desai and Associates, continuous consultation with industry is crucial before setting in place regulations with deadlines that impact business models. It is not practical to expect the regulator to envisage all use cases and tech solutions at any given point in time. Regulation therefore must be flexible, allow industry to innovate within specified safety and risk parameters set by the RBI, in consultation with industry.