BC working models

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Overview of Business Correspondent

(BC)

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The Business Correspondent (BC) model serves as a dual enabler, supporting

both supply and demand in the financial ecosystem. It allows the banking sector to
offer appropriate financial products at affordable rates while simultaneously
stimulating demand through the development of local Points of Sale (PoS).
Recognizing this potential, the Reserve Bank of India (RBI) introduced the BC
model as part of its Financial Inclusion strategy. In 2006, financial inclusion was
formalized as a stated policy, and banks were advised to utilize BCs to enhance
access and address service gaps for the unbanked and underbanked population.
To scale the model effectively, RBI issued guidelines supporting its technology-
enabled expansion, which revolutionized the spread of financial inclusion across
the country. Banks are required to report their use of BCs in their Financial
Inclusion Plans (FIPs).
Key Provisions from the RBI Guidelines:
 A BC organization can partner with multiple banks; however, at the
customer interface level, a retail outlet, Customer Service Point (CSP),
or Business Correspondent Agent (BCA) must serve only one bank.
 The contractual agreement between a bank and its BC must be clearly
defined, legally vetted, and compliant with RBI's outsourcing norms.
 Banks must strictly follow RBI’s 2006 guidelines on managing risks and code
of conduct in outsourcing financial services.
 Most importantly, the bank is fully accountable for the actions and services
of its BCs and their retail outlets or sub-agents.
This structured approach has played a pivotal role in revolutionizing last-mile
delivery of banking services, deepening financial inclusion across India.

Objective
The primary objective of this report is to collect and analyze comprehensive
information on three prominent Business Correspondent (BC) models in India-
Corporate BC, BC Sakhi, and Payment Banks-with a particular emphasis on the
following aspects:
 Business Model: To understand the operational structures, partnerships,
and delivery mechanisms employed by each BC model to extend banking
services to underserved populations.
 Revenue Model: To examine the income streams, commission structures,
and financial sustainability of each model, highlighting how BCs and their
agents generate and share revenue.
 Challenges: To identify and evaluate the key challenges faced by each
model

By focusing on these dimensions, the report aims to provide actionable insights and
recommendations for stakeholders seeking to strengthen the effectiveness and
sustainability of BC models in promoting financial inclusion across India.

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Evolution of the Business Correspondent

(BC) Model
The Business Correspondent (BC) model was introduced in 2006 by the Reserve
Bank of India (RBI) as a pilot project to deliver banking services in remote and
rural areas. After the pilot's success, the RBI issued comprehensive guidelines in
2008, officially allowing banks to appoint individuals or entities as BCs.
In its initial phase, the BC model was limited to basic banking services, such as:
 Opening of bank accounts
 Cash deposits and withdrawals
 Remittance services
 Over time, the scope of the BC model expanded considerably. Today, BCs
are authorized to provide a broader range of financial services, including:
 Loan disbursals
 Insurance and micro-insurance
 Pension schemes
The model has become an essential instrument in driving financial inclusion in
India. It has enabled banks to extend formal financial services to previously
unbanked and underserved populations, especially in rural and hard-to-reach
areas.
Despite its growth, the BC model has encountered scalability and viability
challenges, with many agents—particularly women—struggling to sustain
themselves financially. However, the expansion of the product basket and
greater diversification of services are seen as key pathways to enhance agent
income and strengthen the model's long-term impact.

How different BC are Operating

Corporate Business Correspondents (Corporate BCs)
/ Business Correspondent Network Managers
(BCNMs)
Introduction
Corporate Business Correspondents (Corporate BCs) or Business Correspondent
Network Managers (BCNMs) are institutional partners appointed by banks to offer
banking services in areas where establishing a physical branch is unviable. As a
cornerstone of India’s Financial Inclusion initiative, this model enables banks to scale
their outreach while ensuring compliance and quality service. Banks like South Indian
Bank have adopted a mixed model by deploying both individual and corporate BCs to
enhance rural penetration and support local branches.

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Business Model: Roles, Structure, and Services

Corporate BCs function through a network of Customer Service Points (CSPs),
manned by local agents, who act as the last-mile interface for banking services.
These CSPs carry out a broad range of activities under the supervision of the BCNM,
ensuring consistency and regulatory compliance.

Key Functions and Services:

 Customer Onboarding: CSPs assist in onboarding new customers by
collecting KYC documents, with verification done by the bank.
 Banking Transactions: Facilitate deposits, withdrawals, remittances, and
basic account services.
 Third-Party Products: Promote and cross-sell financial products like
insurance, pensions, and social security schemes.
 Credit Facilitation: Support the formation and monitoring of SHGs and JLGs;
assist in microcredit processing and follow-ups.
 Financial Literacy: Spread awareness about banking practices and promote
formal financial habits.
 Operational Characteristics:
 Each BC typically manages a Sub-Service Area (SSA) covering 1,000–1,500
households.
 Services are enabled through bank-provided or BC-owned infrastructure such
as micro-ATMs, biometric scanners, and handheld devices.
 Real-time integration with the bank’s core banking system ensures seamless
service delivery.

Revenue Model: Earnings, Incentives, and Working Capital

Corporate BCs earn income through a mix of fixed and performance-based
commissions. This structure is designed to motivate high performance, widen reach,
and prevent customer exploitation.
Income Channels:
 Fixed Commission: Paid monthly to BCs performing over 100 transactions
through handheld terminals.
o 30–99 transactions → 50% fixed commission.
o Below 30 transactions → no fixed commission.
 Variable Commission: Based on volume and value of transactions, lead
generation for deposits, cross-selling third-party products, government scheme
enrollments, and loan recovery assistance.
 Expansion Incentives: 50% extra commission for operating in additional
villages (subject to GSMU approval).
 Additional Features:
 No Direct Charges: BCs are not allowed to charge customers directly; fee
structures are set and disclosed by the bank.
 Security Deposit: A mandatory interest-bearing deposit under bank lien
ensures accountability.

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 Overdraft Facility: Banks may provide working capital through overdraft

facilities for daily cash needs.
 Monitoring: Real-time reconciliation with core banking systems and periodic
audits for transparency.

Corporate BCs / BCNMs: Challenges

Despite the structured and scalable nature of corporate BC models, several
operational and systemic hurdles persist:
 Agent Attrition and Low Motivation:
Many CSPs leave due to low income and delayed payments, leading to service
discontinuity. Limited career progression options further reduce retention
rates.
 Connectivity and Infrastructure Issues:
Rural areas often face unreliable internet connectivity, which hampers real-
time transaction processing and customer experience.
 Trust Deficit and Customer Awareness:
In newly served or remote regions, customers may be hesitant to trust BC
agents with their money, especially when financial literacy is low.
 Compliance and Security Risks:
Ensuring that CSPs adhere to KYC, data privacy, and transaction safety
protocols remains a challenge, especially when oversight is decentralized.
 Limited-Service Portfolio:
In many regions, agents are confined to basic banking transactions due to
regulatory limitations or lack of adequate training, reducing their income
potential.

Credit Needs for Corporate Business Correspondents (CBCs) and BCNMs:

Corporate Business Correspondents (CBCs) and BCNMs manage and supervise

networks of thousands of individual BC agents. Their credit needs are significantly
larger and strategic in nature.
 Large-Scale Operational Credit:
o They require capital to hire staff, manage logistics, ensure cash
availability, and maintain a technical helpdesk.
o Funds are also needed for training, compliance, backend tech
integration, and MIS (Management Information Systems).
 Capital Expenditure:
o Investment in digital platforms, fraud detection tools, and agent
monitoring systems is essential.
o Expansion into rural areas needs funding for logistics, agent onboarding,
and marketing.
Due to long gestation periods before profitability and high upfront costs, CBCs often
face liquidity gaps. Without tailored financial products or institutional backing, scaling
becomes challenging.

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Financial institutions, SIDBI, or NABARD-backed credit schemes, along with risk-

sharing models or blended finance structures, can help CBCs meet their credit needs
efficiently.

Success Story: Corporate BC Model

FINO Pay-Tech’s Pan-India Agent Network Driving Digital Inclusion

FINO Pay-Tech, one of India’s largest corporate BCs, manages a network of over 10
lakh agents across 20+ states, facilitating over 5 million transactions daily. Their
model integrates biometric authentication and real-time transaction tracking,
enabling seamless cash-in/cash-out services even in remote areas of Madhya
Pradesh and Odisha. FINO’s partnership with multiple banks and government
schemes like PMJDY (Pradhan Mantri Jan Dhan Yojana) has helped bank millions of
previously unbanked citizens. The company’s robust technology infrastructure and
agent training programs reduced fraud and improved service quality, contributing to
a 40% increase in digital transaction adoption in their operational regions

Self-Help Groups (SHGs)/BC Sakhi as Business

Correspondents
Introduction
The BC Sakhi model utilizes women-led Self-Help Groups (SHGs) as Business
Correspondent agents to extend formal banking services to the most rural and
remote areas. Backed by RBI and adopted extensively in states like Madhya Pradesh,
this model integrates local trust and social networks with formal financial services,
promoting women’s economic participation and grassroots financial inclusion.

Business Model: Community-Based Financial Service Delivery

BC Sakhis provide core financial services while also acting as change agents within
their communities. Their role combines banking functionality with social development
outcomes.
Core Services Provided:
 Basic Banking: Cash deposits, withdrawals, account opening, and balance
inquiries.
 Government Disbursements: Distribute pensions, NREGS wages, and other
DBT-linked payments.
 Savings and Credit: Mobilize group/individual savings and collect microloan
repayments.
 Financial Literacy: Educate the community on digital banking, insurance,
and social welfare schemes.

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 Add-on Services: Utility bill payments, mobile recharges, micro-insurance,

and train ticket bookings (based on local demand).
Operational Setup:
 Operate from homes, SHG centres, or local kiosks.
 Equipped with micro-ATMs, biometric scanners, and mobile PoS systems.
 Transactions conducted via AePS, IMPS, and bank mobile apps.
 Training and support provided by banks, BCNMs, and NGOs.
 Regular interaction and familiarity enhance trust, especially among rural
women.

Revenue Model: Commission-Based Earnings and Working Capital

BC Sakhis earn primarily through transaction-based commissions. Their low-capital
model and strong SHG backing make it an inclusive and sustainable structure, albeit
with some operational challenges.
Earnings Breakdown:
 AePS Transactions: ₹0.10 – ₹0.23 per transaction.
 Money Transfers (DMT): ₹0.40 – ₹0.48 per transaction.
 Bill Payments & Enrolments: Additional income for each account opened,
scheme enrolment, or bill paid.
 Incentives: Given for outreach activities, DBT enrolments, and target
achievements.
 Average Monthly Earnings: Range between ₹3,745 – ₹4,008 depending on
activity and region.
 Working Capital Aspects:
 Initial Investment: Minimal – approx. ₹4,500 for biometric device if
smartphone is already owned.
 Liquidity Support: Real-time reconciliation through BCNM platforms, SHG
pooling, and NGO backing.
 Interoperability: Services compatible with any bank using NPCI platforms
like AePS and IMPS.
 Challenges: Income volatility due to delays in commission and low seasonal
activity.

SHG-based BC Sakhis: Challenges

Although BC Sakhis are deeply embedded in their communities, they face unique
obstacles that stem from socio-cultural and operational barriers:
 Low and Irregular Earnings:
Commissions are often modest and not paid on time, which discourages
sustained engagement, especially for women balancing domestic
responsibilities.
 Mobility and Safety Concerns:
Many BC Sakhis operate in difficult terrains or isolated villages and may not
have safe transport options, limiting outreach and doorstep services.

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 Digital Literacy Gaps:

Despite training, many agents face difficulties operating digital platforms,
especially when updates or technical issues occur.
 Social Barriers:
Being women in conservative rural setups, some BC Sakhis face resistance
from community members or even their own families regarding financial
decision-making roles.
 Cash Management Challenges:
Balancing cash-in/cash-out requirements with limited working capital and
distance to bank branches creates operational strain.

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Credit Needs for BC Sakhis:

BC Sakhis are SHG (Self-Help Group) women who act as grassroots financial service
providers in rural India. Their credit needs are unique due to their socio-economic
background.
 Startup Support:
o Many need initial financial assistance to purchase micro-ATMs, mobile
phones, and set up workspaces.
o Travel costs for training and regular visits to banks add to their upfront
expenses.
 Working Capital:
o They need cash float to serve remote customers, especially for Direct
Benefit Transfer (DBT) withdrawals and deposits.
o Operating in cash-heavy economies makes liquidity management
critical.
Most BC Sakhis are first-time entrepreneurs and face difficulties accessing credit due
to limited documentation and absence of credit history. Support from SRLMs like
JEEViKA (Bihar) includes interest-free loans, CIF (Community Investment Fund), and
revolving funds which help overcome these hurdles.
Continued access to small-ticket, low-interest loans is crucial for sustainability and
income growth. Financial literacy, digital skills training, and ongoing mentoring can
also improve credit utilization.

Success Story: Empowering Rural Women in Bihar through BC Sakhi

In Bihar, BC Sakhis—women from local Self-Help Groups—have transformed financial

access for rural communities. One notable success is from the district of Siwan,
where BC Sakhis helped over 10,000 women open zero-balance savings accounts
and receive government subsidies directly through their accounts. The trust BC
Sakhis built within their communities significantly increased the uptake of banking
services. This initiative also enhanced women’s financial literacy and autonomy,
creating livelihood opportunities for the BC Sakhis themselves, many of whom now
earn a stable income of ₹5,000–₹10,000 per month through commissions and service
fees. The government’s support via NRLM training was crucial for their success

Payment Banks and Business Correspondents

Introduction
Payment banks function with a digital-first, cost-efficient BC model to provide basic
transactional services to the underbanked. Due to RBI restrictions on lending, these
banks focus solely on facilitating payments, remittances, and DBT payouts. Their BC
models are technology-driven and highly scalable.

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Business Model: Agent-Centric Digital Service Delivery

Payment banks operate through thousands of agents or Customer Service Points
(CSPs), often situated within kirana stores, mobile shops, or pharmacies. These
agents are recruited and managed by BCNMs or aggregators.
Functional Design:
 Onboarding: Fully digital – Aadhaar, PAN, and photo via mobile app.
 Tech Stack: Agents use smartphones, biometric devices, and mini printers.
 Transaction Channels: AePS, UPI, IMPS (all interoperable).
 Services Offered:
o Cash-in/cash-out (CICO)
o Money transfers
o Bill payments
o Insurance & pension schemes
o Balance inquiries and account opening
Operational Highlights:
 Minimal infrastructure – mostly app-based.
 High-speed onboarding (2–3 days).
 Ideal for high-frequency, low-cost financial services in urban slums and remote
villages.

Revenue Model: Transaction-Based Commission and Tech Leverage

The agent model of payment banks thrives on volume. Commissions are provided per
service, with centralized performance tracking and regional field support.

Commission Structure:
 Account Opening: ₹15 – ₹25 per account.
 Cash Deposit/Withdrawal: 0.25% – 0.40% (₹2 – ₹10 per transaction).
 Money Transfer (DMT): 0.25% – 0.50% (₹5 – ₹10).
 Bill Payments: ₹2 – ₹5 per transaction.
 Aadhaar Seeding: ₹5 – ₹10 per linkage.
Business Enablers:
 Low Capital Investment: ₹3,000 – ₹5,000 if smartphone is already owned.
 Sustainability: Driven by repeat usage, daily transactions, and retail footfall.
 Monitoring: Dashboard analytics, regional officers, and fraud management.
 Training: Provided by BCNMs and aggregators; includes customer handling,
transaction monitoring, and upselling.

Payment Bank BCs: Challenges

The digital BC model of payment banks is efficient but faces scalability and
compliance challenges due to its heavy reliance on third-party agents.
 Over-Reliance on Technology:
Device malfunctions, app failures, or biometric mismatches can disrupt service
and frustrate customers.

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 High Competition with Thin Margins:

Multiple agents serving the same area dilute transaction volumes, reducing
individual profitability.
 Customer Grievance Redressal:
Since agents are not employees of the payment bank, resolving complaints or
fraud-related issues can be slow and inefficient.
 Inconsistent Training Quality:
Rapid expansion often leads to uneven training standards among agents,
affecting customer service and compliance.
 Regulatory Limitations:
Inability to offer credit products reduces revenue opportunities and makes the
agent model overly dependent on high transaction volumes.

Credit Needs for Payments Banks:

Payments Banks are restricted from lending and therefore rely heavily on fee-based
services. However, to serve the underbanked efficiently, they need capital support in
other critical areas.
 Operational Expenses:
o Significant capital is needed for building secure tech infrastructure
(mobile apps, KYC systems, APIs).
o Managing large networks of agents or kiosks incurs recurring costs in
training, maintenance, and branding.
 Liquidity Management:
o Though they cannot lend, they must maintain mandated balances in
government securities and deposits with scheduled banks, which limits
working liquidity.
 Sourcing Funds:
o Since they can’t generate interest income from lending, they depend
on:
 Equity capital from promoters
 Partnerships with NBFCs for offering co-branded loan products
 Government or donor-funded digital infrastructure schemes
To thrive, Payments Banks require access to institutional credit lines, especially for
operational scaling, tech upgrades, and customer onboarding campaigns.

Success Story: Payments Bank Model

India Post Payments Bank (IPPB) Scaling Financial Services to 105+ Million
Customers
IPPB, launched in 2018, has leveraged India Post’s extensive physical presence to
onboard over 105 million customers as of early 2024, many from rural and remote
regions. IPPB’s integration with post offices and doorstep banking services enabled
efficient disbursal of government benefits, insurance, and pension payments. They
offer zero-balance savings accounts and mobile banking services accessible through

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feature phones. By March 2023, IPPB handled over 1 billion transactions annually,
significantly contributing to financial inclusion in underserved areas. Their success
lies in blending digital technology with the trusted postal network, reducing urban-
rural banking disparities

Competitive Analysis: BC Sakhis vs

Corporate BCs vs Payments Banks
Parameter BC Sakhis Corporate BCs Payments Banks
Geographic Local village-level (5–10 Pan-India coverage National coverage
Coverage km radius) through institutional via digital and
partnerships postal/telecom
infrastructure

Target SHG members, rural Rural and semi-urban Mass market

Audience households, women unbanked/underbanke (unbanked +
beneficiaries d communities digitally literate
segments)

Technology Basic (Micro-ATM, Advanced (biometric Very high (mobile

Use mobile) devices, real-time apps, UPI, APIs, e-
dashboards) KYC)

Services DBT, cash-in/out, Deposits, withdrawals, Savings accounts,

Provided account assistance remittances, remittances, utility
insurance, pensions payments (no loans)

Credit Indirect linkage via SHGs Credit linkage via Cannot lend as per
Access/Offeri or NRLM support partner banks RBI guidelines
ngs

Agent Base ~54,000+ deployed as Over 15 lakh agents 10+ lakh agents
of March 2024 across India (RBI, incl. India Post (over
2023) 1.5 lakh post
offices)
Revenue Commission on Fee/commission-based Fee-based (no
Model transactions + from partner banks lending interest
government incentive income), depends
on volume

Capital Low (₹10,000–₹20,000 High (minimum capital High (₹100 crore

Requirement for micro-ATM & working of ₹1 crore) minimum capital
capital) required by RBI for
Payments Bank
license)

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Strengths High trust, women-led, Scalable model, Digital efficiency,

last-mile penetration diverse services, bank speed, nationwide
integration access, fintech
innovation
Weaknesses Low scalability, tech Expensive to operate Cannot lend, lower
limitations, dependency in remote areas, agent trust in rural areas,
on SHG support attrition revenue limitations

Transaction Limited to 35-40/day Agents do 100–300+ UPI transactions

Volumes depending on location daily transactions reached 596 million
daily, resulting in a
total value of ₹24
lakh crore.

Training & Government-sponsored In-house training or Centralized digital

Support via NRLM/State Missions via NGOs and literacy and
agencies customer support

Scalability Low–Moderate (limited High (institutionally Very High (digital

to SHG areas) backed scale-up channels,
possible) telecom/post
networks)

CSC role in different BC’s Models

CSC’s Role in the Corporate BC Model
In the Corporate BC model, CSC e-Governance Services India Ltd functions as one of
the largest Corporate Business Correspondents in India. CSC SPV has formal
partnerships with multiple public and private sector banks such as State Bank of
India, Punjab National Bank, Bank of Baroda, and HDFC Bank to offer financial
services through its network of over 5 lakh Digital Seva Kendras. These CSCs serve
as Business Correspondent outlets by offering account opening, cash-in/cash-out
services, AePS transactions, loan applications, and government scheme enrolments.
CSC operates under the Bank Mitra framework, where VLEs are equipped with micro-
ATMs or biometric devices to offer basic banking functions. The CSC SPV acts as a
Business Correspondent Network Manager (BCNM), responsible for onboarding,
training, and monitoring of Bank Mitras, while ensuring integration with bank systems
and regulatory compliance. The CSC ecosystem enables rapid scale, especially in
underserved geographies, due to its established digital infrastructure and existing
presence in every gram panchayat. CSCs are integral to the Corporate BC model as
they provide both operational scale and service diversification.

CSC’s Role in the BC Sakhi Model

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Although the BC Sakhi model is primarily driven by State Rural Livelihood Missions
(SRLMs) under the NRLM framework, an increasing number of BC Sakhis are
integrating with CSC infrastructure. In several states, BC Sakhis have established
their own CSCs after receiving digital literacy and financial services training. This
convergence enables them to offer a wider range of digital services, such as Aadhaar
seeding, mobile recharge, insurance enrolment, and e-governance document
facilitation in addition to their banking functions.
In states like Uttar Pradesh, official collaboration between UPSRLM and CSC-SPV has
allowed thousands of BC Sakhis to become registered CSC Village Level
Entrepreneurs (VLEs), expanding their revenue streams. The combined role improves
last-mile delivery of both financial and digital governance services, especially for
rural women. However, this convergence is not uniformly implemented across all
states, and in some areas, CSCs and BC Sakhis operate in parallel or compete for
similar transactions like DBT payments or AePS withdrawals. CSC infrastructure
provides an opportunity for BC Sakhis to formalize and scale their service delivery if
integrated strategically.

CSC’s Role in the Payments Bank Model

CSC has played a strategic role in supporting Payments Banks, particularly the India
Post Payments Bank (IPPB), by acting as a channel partner for service delivery. CSC-
SPV signed a memorandum of understanding with IPPB to allow VLEs to offer banking
services such as account opening, fund transfers, DBT disbursement, and utility bill
payments. This collaboration allows IPPB to expand its reach beyond post offices by
leveraging CSC’s rural presence.
The integration between CSCs and IPPB is also facilitated through digital APIs and
service-level agreements that allow seamless transaction processing. VLEs working
under the CSC umbrella have been trained to operate IPPB digital interfaces and
assist customers with Aadhaar-based authentication and other banking functions. In
this model, CSCs function as access points rather than full-fledged BCs, but they
serve a crucial role in bridging the gap between formal banking institutions and
underserved populations. In areas where traditional banks or post offices are
unavailable, CSCs are often the only functioning financial service touchpoint.

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