These are strange times for the nascent banking-correspondent (BC) industry, which is a vital link to reach the financially excluded. On the one hand, it is seeing from the sidelines the creation of an opportunity that can add Rs 3,000- Rs 4,000 crore to its revenues in the next couple of years. On the other, it is being told that if it wants to partake of this opportunity, it will have to change its business model.
That model is being followed by all BCs, including market leader FINO. A BC has agents carrying handheld terminals, through which customers can make deposits or withdrawals from their bank accounts. The current model is a proprietary one: it locks a customer not just to a BC firm, but also to its designated agent for that area.
Since transactions are not updated real-time between an agent of a BC and its server, villagers can bank only with that BC's agent in the village.
Even if updated real-time, they can access their account only in those areas where the BC is present. It gives poorer Indians banking access, but in a limited form.
This is something the Unique Identification Authority of India (UIDAI), the government body designing the architecture to deliver welfare services via cash transfers, wants to change. In a full rollout, 3,00,000 crore of cash transfers will flow into bank accounts of villagers and will be accessed through the BCs. But the UIDAI's proposed solution has triggered a big battle.
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