The year 2006 was a watershed in the history of Indian banking when business correspondents (BCs) were introduced to take access to financial services to rural areas. Since then BCs have focused aggressively on creating a much needed financial services network in the hinterlands of the country. BCs such as FINO PayTech have spent close to Rs.4bn in establishing a robust financial services network. It is largest in the country as well as globally in terms of spread and volumes.
Since then over 100 million of the un-served/under-served population (FINO PayTech alone accounts for around 35 million) across the country have got access to basic savings bank accounts along with a range of products and services. However, a greater push is required to drive total financial inclusion in India.
According to RBI, "Financial inclusion is the process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost in a fair and transparent manner by mainstream institutional players."
According to FINO PayTech, BCs as an alternate channel have to be given its own place under the sun. The scale that the BC industry has achieved thus far is of paramount significance and impact both at macro and micro level economics of the rural poor & those at the bottom of the pyramid (BoP). Whilst this achievement has surpassed the expectations of its formulators, the following needs attention for the BC model to evolve as the most preferred delivery model for financial services across the hinterland.
Our expectations from the current budget remain:
1. BCs be given industry status: We expect the government to support us in the form of relaxations on capital expenditure or even subsidizing such expenditures. We would request for exemption of service & other input taxes like VAT/CST. This would help in lowering the cost of operations which at present are quite substantial. Government can also support by treating BCs as SEZ units and extending various types of special Incentive and benefits.
2. Priority Sector Lending: The BC business requires high capital both in terms of Capex and Opex. We would request BCs to be provided Priority Sector Lending (as largely the services are provided in the rural areas) and this would help in reduction of capital costs. As BCs we are building an infrastructure for delivering banking and financial services to the last mile.
3. Excise duty relaxation: Removing the excise duty on the smart cards which is currently at 5% would bring down the customer acquisition costs further.
4. Appropriate remuneration to business correspondents: With this the channel can bring greater sustainability and scalability in the model, especially for government's EBT/DCT business where volumes costs are huge.
5. Incentives from IRDA to promote micro insurance in rural areas. Addressing these aspects would not only strengthen the banking channel but would also provide impetus in bringing a large segment of the population under the formal banking system. BCs have and continue to demonstrate their ability in taking banking to the masses. They should be supported, encouraged and incentivised.
-Rishi Gupta, Chief Financial Officer, FINO Paytech