Banking agents and business correspondents (BCs) operating in the Direct Benefit Transfer (DBT) scheme and other banking services are finding the going tough due to certain grey areas in the implementation of some of the services.
Taking up the issue with the Department of Financial Services (DFS) and NITI Aayog, BCs have said the DBT of the government is not reaching all the citizens and many banks have kept away from Aadhar enabled payment system (AEPS). “All the banks receiving DBT from the government in customer accounts are not participating in the AEPS settlement. This restricts access of DBT money to the citizen,” said a banking source.
On the other hand, AEPS device subsidy being offered by NABARD is not being availed by the banks, thereby leaving the banks to purchase the AEPS devices without subsidy. “This makes government announcements irrelevant and many BC agents can’t afford the device cost,” said Anand Kumar Bajaj, founder of PayNearby, a fintech company in the banking sector.
In separate meetings held by Niti Aayog and DFS, BCs complained to the government about the reduction in fees. While 3.15 per cent fee was proposed by the government to be paid to BC agents for facilitating DBT disbursement to the citizen, currently only 0.15 per cent is being paid to BC agents, making the channel unviable, they have said.
Business Correspondents, authorized by the Reserve Bank of India, are retail agents engaged by banks for providing banking services at locations – mostly remote areas — other than a bank branch or ATM. BCs enable a bank to provide its limited range of banking services at low cost, thus promoting financial inclusion.
Another complaint of the bankers is that RuPay debit cards are not being used by the end users. “Many cards issued over years have crossed the validity dates. Customers are not aware of the incentives for activating RuPay cards. Hence acquiring business is not viable and merchant onboarding is slow,” Bajaj said.
In March this year, the National Payments Corporation of India (NPCI) reached a “milestone” by issuing over 64 million RuPay Global cards, since first issuing it in 2014. NPCI had reported a volume of 695 million involving a value of Rs 80,823 crore in RuPay card usage at POS (point-of-sale) terminals in 2018-19.
Yet another complaint of banking agents is that small retail money is not coming into the formal banking sector. As granular savings is costly for the banks to mobilise from each household, banks generally don’t take interest in such small savings. Serving them is further costly due to the unsaid rule of sending a physical account statement to the customer each month. Hence, banks are not taking much interest in offering recurring deposits of small ticket like Rs 100. “This money is going into unregulated and unscrupulous schemes,” banking sources said.
In 2006, the RBI prohibited BC agents from offering services of more than one bank. “In those days, all processes were manual. A sponsor bank mostly offers only a couple of services through the BC agent network. This means, a BC opens multiple BC agent outlets at a high cost to offer services of multiple banks to customers or leaves them underserved,” Bajaj said.
On top of this, even for a single service by a sponsor bank, if the sponsor bank the system is down due to some reason, the customers can’t be serviced since back up is not allowed.
Further, onboarding a gents and customers by BCs has become unviable and risky due to manual work without eKYC. As per recent directives of the RBI which says that authorised representative of a regulated entity can do KYC (know your customer) of customers, the banks are interpreting that the authorised representative is only the employee of the bank and only bank employees can do KYC. The RBI had earlier removed the distance criteria of setting up BC agent outlets beyond 30 kms. Even if a BC agent is set up in remote areas, the bank employee will need to travel there to do KYC. “BC agents are authorised to offer services of the bank to the customers, but for the purpose of KYC, they are an authorised person,” said a representation to the government.
Though there’s nil GST for serving Jan Dhan accounts and accounts in rural areas, while serving these accounts, the common IFSC code of centralised Core Banking System is used and hence identification of these accounts is not possible, thereby making the service to these accounts at BC agent outlet as violative of the government intent since GST is charged to all.
“Even though up to Rs 40 lakh is exempt from GST, poor agents earning Rs. 2,000 a month is also being impacted by the reverse charge mechanism. Thus the service is not viable,” he said.