By Anita Suri
In a diverse country like India where a significant portion of the population resides in rural areas, ensuring access to financial services has always been a challenge. But the revolutionary concept of business correspondents in the Indian banking sector is helping in bridging the gap between urban and rural banking. In 2021, women entrepreneurs received 68% of loans under the scheme Pradhan Mantri Mudra Yojana with the help of BCs. These dedicated individuals play a pivotal role in bringing financial services to the doorsteps of rural communities while reshaping the landscape of banking in India.
Bridging the Banking Gap:
Business correspondents or banking correspondents are individuals that are authorized by banks to provide banking services in areas where the banks themselves do not have a physical presence. These entities act as intermediaries between the banking system and those residing in rural areas or the unbanked population. Banks are now finally able to extend their reach and services to remote regions of the country through these correspondents while enabling financial inclusion.
Increasing Financial Inclusion and Promoting Savings and Credit Facilities:
One of the most significant contributions it has led to is its impact on financial inclusion. By setting up banking services in rural India, they have opened a gateway for the unbanked population to access formal financial services. The financial services include opening bank accounts, depositing and withdrawing cash, and availing basic banking facilities. These correspondents bring the bank to the people who help in eradicating the need for them to travel long distances to avail of banking services.
The job of the business correspondent is not just limited to bridging the financial gap and boosting financial inclusion instead it also plays a crucial role in promoting savings among rural communities. They encourage people to open bank accounts and foster a culture of saving money and helping individuals secure their earnings. Moreover, they facilitate access to credit for rural communities, enabling them to invest in income-generating activities and uplift their socio-economic status. The availability of credit helps the rural population in starting small businesses, purchase agricultural equipment, and meet other financial requirements.
Enabling Digital Transactions
Imagine a world where banking services are not limited to the elite few, but accessible to every single individual, regardless of their background. That’s the vision of the BC model, but it faces some tough obstacles. Mobile devices offer immense potential, but security and cost reduction need innovative solutions. Collaboration is crucial; a shared data-sharing platform could empower a BC to serve multiple banks. With their local knowledge and fluency in the language of the people, BCs became the bridge that connected banks to the rural masses.
- As per International Journal of Current Advanced Research, through the Pradhan Mantri Jan Dhan Yojana (PMJDY), a whopping 38,07,44,095 crore accounts were opened, with a staggering 22,51,88,256 from rural and semi-urban areas alone.
- These accounts hold a staggering 1,30,000 crores in savings, bringing financial inclusion to the forefront. Thanks to BCs, 319 million basic saving bank deposit accounts (BSBDA) were opened by March 2019.
- The impact didn’t stop there; the implementation of the BC model led to increased transaction volumes, expanding the coverage and stability of the banking sector.
- BCs played a pivotal role in enhancing financial literacy in the country, particularly in rural areas, as they acted as messengers of financial awareness and promoters of banking products.
With BCs leading the way, the journey towards financial inclusion became more engaging, accessible, and fruitful for all. Positive progress is already underway in India with a unique identification system. By overcoming these challenges, banks and the government can achieve their goals of financial inclusion, ensuring that every Indian benefits from the country’s economic growth.
Impact on Rural Communities:
Business correspondents have brought significant changes in the lives of individuals and rural communities. They educate and guide people in using digital banking services, such as mobile banking and internet banking and ultimately bridge the digital divide and empower rural individuals to participate in the digital economy. It has not only reduced the dependency on informal channels, such as moneylenders but has also shifted rural India to formal banking systems which helps in eliminating exploitative practices and ensures transparency in financial transactions. The availability of banking services within their reach and the increased adoption of digital transactions through the guidance of business correspondents have made financial transactions safer and more efficient. This has opened doors for individuals to access various government schemes and subsidies directly.
Business correspondents are redefining banking in rural India by playing a catalytic role in boosting financial inclusion and empowering rural communities. Their role in bridging the banking gap, promoting savings, facilitating access to credit, and enabling digital transactions has revolutionized the banking landscape in rural areas. As India takes steps and progresses towards becoming a digitally inclusive nation, the contributions made by the business correspondents will continue to play a vital role in transforming the lives of millions while paving the way for a more empowered and inclusive future.
(The author is Anita Suri, Head – Strategic Relations, Manipal Technologies Limited, and the views expressed in this article are his own)
