Decline in rural transactions may hit BCs’ financial model

Mumbai: A pointy fall in withdrawals and transactions in rural India during the last two months is threatening to destroy the working mannequin of business correspondents (BCs), who accumulate charges on the idea of every transaction.

Payment firms are involved that the eight lakh BCs throughout the nation will now not discover it profitable sufficient to proceed resulting from a pointy drop of their revenue, and that might impede the monetary inclusion initiative.

“BCs earn anywhere between 20 and 80 per transaction, depending on its type. In the past two months, due to the lockdown and its impact on economic activity, the number of these transactions has fallen. As a result, there is no incentive for these last-mile connectors especially in the rural areas,” stated Seema Prem, CEO, FIA Global, which has 15,000 such correspondents registered with it.

Typically, these BCs earn 40 for each 10,000 withdrawn by them. But since incomes have fallen sharply, withdrawals have been restricted to simply the 500 monthly transferred by the government to those accounts, which implies BC revenue has fallen to simply 2 per transaction.

Besides the autumn in revenue from withdrawals, revenue earned from promoting excessive price insurance coverage and pension merchandise can also be subsequent to nothing, impacting the viability of BCs.

“There are no other products being sold because people want to conserve cash. In normal times, BCs used to take deposits and adjust it against the demand for withdrawals. Now, since deposits are next to nothing, they need to go to the branches to get cash, which also increased their costs. All in all, they are finding it difficult to eke out a living in the present circumstances,” Prem stated.

As a consequence, the Business Correspondent Federation of India (BCFI) has urged the federal government to present a 5,000-per month per BC grant from April to September to assist them tide over the monetary pressure. The calls for additionally embody life and well being cowl as a assist through the pandemic.

BCFI stated that assist to BCs throughout this time is essential as a result of their providers will likely be required to make sure money availability as soon as the financial system is up and operating.

“During Covid-19 lockdown, more than 80 per cent of agents have worked tirelessly to meet the demand for money, especially enabling the withdrawal of direct benefit transfers released by the government. With the gradual opening up of the economy, the role of BCs will become even more important as cash starts flowing into the system, loans start getting repaid and new loans disbursed,” stated Sasidhar Thumuluri, chairman, BCFI.