As per RBI Data, as on March 2020 there were 5,41,175 business correspondents in villages and 6,35,046 business correspondents in urban areas. So there are 11,76,221 Customer Service Points covered by the business correspondents (RBI Annual Report 2020) whereas there are only 86,915 branches of Public Sector Banks as on Dec, 2020. These business correspondents are working under the national business correspondents. National business correspondents are corporates including Reliance. There are financial technology companies such as Fintechs, Non Banking Finance Companies (NBFCs) who are representatives for more than one bank. One business correspondent serving more than one bank itself can lead to conflict of interest. They appoint business correspondents called ‘Customer Service Providers’ who set up offices and handle various businesses of Banks. They open accounts, disburse money, recommend loans and act as intermediaries for Banks. Around 30% of the commission earned by them is taken by the national business correspondent under whom they work.
A study titled, “An analysis of the Financial Viability of CSPs and client satisfaction” by Centre for Micro Finance and Bankers Institute of Rural Development (BIRD) clearly stated that the BC model is exploitative for the Customer Service Provider as well as the Customers. Because customers are charged for the services.
Another study by a group of students from the Jawaharlal Nehru University covering 6 states in India brought out details of exploitation in the banks, “Financial Inclusion – By extending Banking Services – Comprehensive Analysis of Business Correspondent Model” (Paramount publishing house) pointed out that-
- The current business correspondent Model is ineffective in achieving its main objective of financial inclusion.
- For the CSPOs, they should be brought under the formal banking ambit and not by outsourcing.
The banks have switched over to the ‘National Business Correspondent Model’ instead of ‘Business Correspondent’ appointment which existed in the initial years to prevent Unionisation. The existing business correspondents were asked to work under a national correspondent or quit.
Thus, more than 11 lakh people who are regularly rendering banking services are working like slaves. Soon their number may exceed regular employees. They spent money for setting up Customer Service Points, they employ staff, they set up computers but get a small commission out of which 30% is eaten up by the national correspondent.
They were the ones who helped banks to open 43 Crore Jan Dhan Accounts. Likewise, they are the ones who distribute Direct Benefit Transfer. They have been working without any time limit during the pandemic. They don’t have a union but their exploiters- the corporate business correspondents have the ‘Business Correspondent Federation of India.’ One of their patrons is the World Bank Group’s International Finance Corporation. Furthermore, they attend government committee meetings, and they are in the steering committee of the National Payment Corporation of India (NPCI)
This exploitation must stop. They should be regularised as bank employees and the CSPs should be converted into branches of Public Sector Banks. That will lead to real financial inclusion and stop exploitation of the qualified unemployed youth of the country.
Thomas Franco is the former General Secretary of All India Bank Officers’ Confederation.