A spike in transactions in Jan Dhan accounts over the past three months has led to nearly three to four-fold rise in demand for banking correspondents in rural areas. However, despite the surge, the average income of banking correspondents has taken a beating due to the low value of transactions.
To tide over the economic crisis caused by Covid, in March this year, the government announced an ex-gratia payment of Rs 500 to women Jan Dhan account holders for three months starting from April. This led to a sudden surge in activity, mostly withdrawals, from the Jan Dhan accounts. Many inactive accounts too turned active in this phase.
The number of transactions in rural accounts has gone up by nearly 40-45 per cent in the last three months, according to banking correspondent providers.
“In pre-Covid times we were on an average adding 1,000 Banking Correspondents in a month. However, April onwards we are now on boarding about 5000 agents a month. In May we saw the highest ever on boarding of about 5,700-plus agents in a month and this month (June) as well we are looking at adding 6,000-plus business correspondents,” said Amit Nigam, Executive Director & COO, Bankit, a fintech firm.
However, despite this increase in demand, banking correspondents saw average income falling by 10-15 per cent in their average monthly incomes, according to Seema Prem, CEO, FIA Global, a fintech firm.
“The agents had to work more as the value of transactions were low, which in-turn led to lower commissions. Some banks came forward to compensate for this loss by providing incentives. For example, State Bank of India came up with a Covid incentive for banking correspondents. Under this, if a banking correspondent was active for 21 days, he or she was entitled for an incentive of about Rs 3000 per month,” said Prem.
Apart from a fixed salary, banking correspondents are entitled to get commission of each transaction, depending upon the value of the transactions. In the pre-Covid times, the average salary of a banking correspondent was about Rs 11,000-12,000 a month.
According to Prem, the number of monthly requests for banking correspondents has gone up from about 100 to nearly 400 in the last three months.
Between April end and mid June, close to 11 million new beneficiaries were added in the Jan Dhan scheme.
“In the last three months, there has been nearly 40-50 per cent rise in transactions through banking correspondents. Over the last few months, their relevance in the banking sector has gone up significantly,” says Prakash Prabhu, chief executive officer of Bengaluru-based Atyati Technologies, a technology platform provider for the rural banking sector in India.
Banks too are now looking to augment their rural presence, manned by banking correspondents. For example, UCO Bank is planning to roll out about 100-150 rural kiosks for basic banking services in the coming months, said A K Goel, MD and CEO of UCO Bank.
“There has certainly been an uptick in the demand of banking correspondents in the last three months,” said S Harisankar, Managing Director and Chief Executive Officer of Punjab & Sind Bank.
Recently, SBI created a separate Financial Inclusion & Micro Market’ vertical within the bank, for focused lending in rural and semi urban areas. This is further likely to boost the demand for banking correspondents.