Banking Correspondent (BC) Model
The Business Correspondent model is RBI's last-mile financial inclusion framework allowing banks to deliver basic banking services through agents — individuals, NGOs, corporates — in underserved geographies where full branches are not commercially viable.
The Business Correspondent (BC) model was introduced by the Reserve Bank of India in January 2006 through a circular permitting banks to appoint non-bank agents to deliver financial services. The framework was progressively expanded in subsequent years to include a wider range of BC agents and a broader menu of services. The model was central to India's financial inclusion strategy, recognising that brick-and-mortar branch expansion could not economically reach every village within a reasonable timeframe.
BC agents — which include individuals, NGOs, microfinance institutions, rural postal agents, kirana stores, and corporate entities — are equipped with handheld point-of-sale (POS) devices, biometric authentication through Aadhaar, and connectivity (initially GPRS/2G, later improved with increasing mobile broadband penetration). They provide account opening, deposit and withdrawal transactions, remittances, loan repayments, and basic insurance and pension enrolments.
The Jan Dhan Yojana programme, launched in August 2014, dramatically accelerated the deployment of BCs as a vehicle for mass account opening. BC-enabled accounts under PMJDY crossed 500 million accounts by the early 2020s, though account dormancy and thin balance profiles remained challenges. The Direct Benefit Transfer ecosystem — channelling government subsidies, MGNREGS wages, PM-Kisan instalments, and pandemic relief directly into Aadhaar-linked accounts — created transactional flow through BC points that improved economic viability.
BC agent economics hinge on transaction commissions paid by sponsoring banks, the volume of DBT-linked transactions, and the scope for cross-selling products. BC network operators (BNOs) — companies that manage large agent networks on behalf of multiple banks — emerged as an institutionalised layer, improving agent training, compliance, and liquidity management.
For banking sector investors, the health and scalability of BC networks is a proxy for the low-cost, granular liability franchise that underpins CASA ratios in public sector banks and aspirationally in some private sector banks. BC-delivered small-ticket lending, including Kisan Credit Card (KCC) renewals and micro-loans under MUDRA, also contributes to the priority sector lending (PSL) portfolio.