About two years ago, when Amita Ghosh was still in a full-time clerical job with a private sector firm on the outskirts of Kolkata, many of her acquaintances had already seen a brisk rise in income as banking correspondents (BCs) in a short span of time. Their income suddenly rose three-fold, from an average of Rs 5,000 to around Rs 15,000 per month.
In August 2014, when the Pradhan Mantri Jan Dhan Yojana was launched, close to 100,000 banking correspondents were roped in, for banks scrambled to meet targets set by the government. Most of them being either higher secondary or secondary school pass-outs, otherwise engaged in low-earning or informal sector jobs. Not only the BCs were entitled to fixed income of Rs 5,000 per month, but also commission payable on transactions, and new account-opening meant a good variable component. Allured by the offer of a better earning, Saha quit her job, which paid her around Rs 4,000 per month, to be a BC. For close to two years Saha’s average monthly income rose to Rs 13,000 per month, peaking around the time of demonetisation, when she earned about Rs 18,000 per month.
Cut to January 2018, Saha’s income has plummeted to Rs 6,000-6,500 per month as BCs bear the brunt of cost-cutting measures of public sector banks. Notably, few months back, when the government proposed the possibility of reduction of perks for regular employees of public sector banks, a strong opposition by bank employees ensured that such a measure was never implemented.
Now, with most public sector banks under prompt corrective action (PCAs) by the Reserve Bank of India (RBI), entailing restriction in lending and expansion, BCs find their incomes going down as a part of cost-cutting exercise.
“Banks have reduced commission for BCs in the last few months, and some banks have reduced it by as much as 50 per cent. So there is lesser money on the table for both the service provider and business correspondents. However, banks must understand that if they want to see financial inclusion as a profitable business, they must invest in it and support us in rolling out new products,” said Prakash Prabhu, chief executive officer of Bengaluru-based Atyati Technologies, a technology platform provider for the rural banking sector in India.
At present, most banks outsource rural banking services to corporate agents, who in turn deploy BCs. Apart from a fixed salary component, the BCs used to get about 0.75 to one per cent commission on business volume, or total withdrawal and deposits.
While earlier most banks used to offer the same commission for withdrawal and deposits, now banks have been offering less commission on withdrawal.
Thus, earlier, an average BC, providing a business of Rs 0.5-0.7 million a month, would earn as much as Rs 5,000-7,000 as commission (at the rate of one per cent on business volume). In effect, he would draw a total monthly salary of Rs 10,000-12,000, inclusive of a fixed component of Rs 5,000 per month. In addition, opening new accounts would also attract rewards at the rate of Re 1-5 per account. Now, the same agent earns a Rs 2,500-3,000 per month commissions, which have halved to almost 0.32-.55 per cent, according to a business correspondent. Thus, effectively the total monthly salary of BCs have reduced to around Rs 6,000-8,000. Also, with few new accounts being open, the top-up commission has also eroded.
Banks on their part defend the reduction in commission as they detected several discrepancies in transactions by BCs as they frequently deposited and withdrew money for the sake of earning commissions.
“We saw in many cases discrepancies as money would be deposited one day, and withdrawn the next day. Hence, we ended up paying one per cent commission on a transaction with little value for the bank,” said an executive of a public sector bank.
The job profile of BCs is also changing, leaving little scope for women BCs, as they are now being asked to double up as loan recovery agents for banks.
“We are in discussion with one or two banks for deploying BCs as NPA recovery agents. We still need to assess if that makes a good business proposition or not,” said Vikaas Goel, Executive Vice President and Head (Corporate Business), Fino Payments Bank.
“We have instrumental in recovering as much Rs 4 billion for a public sector banks. In fact, the job profile of BCs is undergoing a big change, and the only way forward involves multitasking, for transactions alone will not bring business. The business of new account opening has also dried, further reducing the earnings of BCs,” said the head of corporate business correspondent firm.business-standard