MC Explains | What is banks’ business correspondent network?

India’s banking sector is witnessing the fastest pace of credit growth in nearly a decade, and business correspondents (BCs) are a part of the core process of credit delivery to remote and unbanked areas.

Moneycontrol on September 16 reported first that the BC partner of country’s largest lender SBI, Save Solutions, is eyeing an initial public offering (IPO) in FY25.

Through this explainer, Moneycontrol will walk you through BCs - what are they and why they are critical to India’s banking infrastructure:

To put it simply, BCs are agents who connect banks with customers.

BC touch points allow bank customers to undertake critical banking transactions including withdrawal of cash and money transfer, among others.

As per the Reserve Bank of India’s (RBI) FY22 annual report, the total number of business correspondents in villages has increased from more than 11.9 lakh in 2020 to 18.44 lakh in 2021, reflecting the penetration and scale that banks generate partnering with BCs.

Urban locations covered by banks through the BC channels also rose to 14.12 lakh in 2021 from 3.24 lakh in 2020, as per RBI data. The sharp increase was on account of higher amount of data provided by “a few” private banks, the RBI said.

The total number of bank BCs in villages during 2010 stood at 34,174, while banks in urban areas reported having 447 BCs during the same period. The data highlights how significantly banks have been using the BC network to reach masses.

As per the Indian Banks’ Association website, there are 285 corporate BCs in India including Fino Payments Bank, Save Solutions, Airtel Payments Bank, among others.

Individually, SBI has the highest number of BC partners, at 71,968 across country.

In exchange for providing banks’ various services to its customers, BCs charge a pre-determined minimum fee per transaction to the bank.

As per Save Solutions MD Ajeet Kumar Singh, digitisation does not pose any threat to the BC model.

“Even though digital transactions are increasing, digital platforms have more presence and are used more in urban areas but 95 percent CSPs (customer service points) are in rural areas,” Singh said.

“The rural area users are not very friendly with digital payment methods. They all are more into cash payments and transactions,” he added.