Banks have to innovate their organisational structures and support systems to increase the viability and the sustainability of the business correspondent model, said Dr Subir Gokarn, Deputy Governor, Reserve Bank of India
“It is reasonably clear that the business correspondent model is not infinitely scalable,” he said. However, even with all these concerns, it is a good beginning and a generic model. With appropriate adaptations to local conditions it is the most likely way to achieve at least minimal access to the financial system through a basic or no-frills bank account.
Dr Gokarn said this while speaking on financial inclusion, and to what extent the banking correspondent model could help.
Delivery mechanism
He noted that the fundamental problem in financial inclusion is the challenge of managing costs of a large number of small-ticket transactions in far-flung areas. What is needed here, said Mr Gokarn, is to develop last-mile delivery mechanisms that can take these products from the large providers in the formal sector to this vast pool of new customers.
Quoting a study, Dr Gokarn said that social obligations, old-age security, children's education and providing for emergencies are the four biggest motivations for households to save.
Noting this, he said that there was a role for the insurance industry in this area. Insurance penetration in India
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