Business correspondent

Also called: BC, Banking agent · Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Beyond NCERT

Meaning

A business correspondent (BC), also called a "bank mitra" or banking agent, is a person or agency that a bank appoints to give basic banking services in places with no bank branch. These services are deposits, withdrawals and remittances (sending money to someone else).

• BCs brought banking to villages where a full branch would cost too much to run.
• They became the main delivery channel for Swabhimaan (2011) and PMJDY (2014).

Explanation

How the model works

• The bank appoints the BC. The BC works for the bank but is not a bank. The bank stays responsible for what its agent does.
• The BC works from a small point in the village, such as a shop or kiosk, or goes door to door. Customers do not need to travel to a distant branch.
• Services offered:
• opening basic accounts;
• cash deposits and cash withdrawals;
• remittances;

• balance checks.

• Why banks use BCs:

• a branch needs a building, staff and security, so it costs a lot;
• a BC point costs much less;
• so banks can reach small, remote villages at low cost.

The technology behind BCs

• Micro-ATM: a small hand-held device that checks who the customer is by fingerprint.
• AePS (Aadhaar-enabled Payment System): a customer can withdraw cash or check their balance with only their Aadhaar number and fingerprint.
• How the chain works:
• the customer gives their Aadhaar number and fingerprint at the BC point;
• the micro-ATM checks the fingerprint;
• the transaction goes to the bank, and the BC hands over or collects the cash.

What makes the BC channel stronger or weaker

• Stronger when:
• Aadhaar-linked accounts are common (the JAM trinity: Jan Dhan-Aadhaar-Mobile);

• DBT money flows into accounts, so people have a reason to visit the BC.

• Weaker when:

• fingerprint checks fail, which is common for old people and manual workers;
• the network or device at a remote BC point goes down;
• the BC does not have enough cash on hand, or earns too little to keep going.

Where BCs fit in measuring inclusion

• RBI's FI-Index (Financial Inclusion Index) is one number from 0 to 100. BCs count under Access, together with branches and ATMs.
• Formula: FI-Index = 0.35 × Access + 0.45 × Usage + 0.20 × Quality.
• Worked example: Access = 70, Usage = 60, Quality = 75 → 24.5 + 27 + 15 = 66.5.
• Access has a weight of only 35%. Usage has 45%.
• So opening more BC points alone does not raise the index much. People must actually use their accounts.

In India

• 2006: the RBI allowed banks to use the business correspondent (BC) model to bring banking to places with no branch.
• 2011, Swabhimaan: a campaign to give banking services to habitations of 2,000+ people, mostly through BCs.
• 28 August 2014, PMJDY: BCs ("bank mitras") helped open zero-balance accounts, called Basic Savings Bank Deposit (BSBD) accounts, for unbanked households.
• Scale: 1,26,985 bank mitras had been deployed by December 2016 [2].
• DBT (Direct Benefit Transfer, from 1 January 2013): MGNREGA wages, old-age pensions and scholarships go straight into bank accounts. Many rural people take this cash out at BC points using AePS.
• Measurement: BCs count in the Access part of the RBI's FI-Index. The index rose from 64.2 (March 2024) to 67.0 (March 2025) [3].
• Policy frame: the RBI-led National Strategy for Financial Inclusion (NSFI) 2025-30 [4].

Don't confuse with

• Bank branch: a branch is a full office of the bank with its own staff. A BC is an outside agent that offers only basic services at a much lower cost.
• Business facilitator (BF): a BF only helps with support work, such as finding customers and collecting papers. A BC can also handle cash and carry out transactions for the bank.
• Payments bank: a payments bank is itself a licensed bank. It can take deposits (with a limit) but cannot give loans. A BC is not a bank at all. It only acts for a bank.
• Moneylender or informal agent: these belong to the unregulated, informal system and often charge high interest. A BC is part of the formal system, because it acts for an RBI-regulated bank.

Prelims Hooks

• The BC model was allowed in 2006, one year after no-frills accounts (2005). BCs are also called "bank mitras".
• A BC is an agent of a bank, not a bank. The appointing bank stays responsible for the BC's work.
• Micro-ATMs check customers by fingerprint. AePS lets a customer withdraw cash or check their balance with only their Aadhaar number and fingerprint.
• Swabhimaan (2011) covered habitations of 2,000+ people, mostly through BCs.
• 1,26,985 bank mitras were deployed by December 2016 [2].
• Trap: BCs come under Access (35%) in the RBI's FI-Index. Usage (45%) has the highest weight.

Mains Points

• Low-cost last-mile banking. BCs made universal account access possible without a branch in every village.
• They are the ground-level link in the JAM + DBT chain.

• Wages and pensions reach remote villages, and fewer middlemen are involved.

• Access is not inclusion. BC points raise Access, but inclusion needs Usage too.

• Average PMJDY balances are only about ₹4,786 per account (2025), worked out from [1].

• So the BC channel should move beyond cash-in and cash-out to small loans, insurance (PMJJBY, PMSBY) and pensions (APY), which fits the Rangarajan Committee's aim of "timely and adequate credit".

• Risks to fix. People can be excluded when fingerprint checks fail, and a remote BC point can go down.

• First-time users are also at risk of fraud.
• Solutions: backup ways to prove identity, better connectivity, fair pay for BCs, and financial literacy work (helped by the 1930 cyber-fraud helpline).

Related concepts

• Financial inclusion
• Zero-balance account
• Direct benefit transfer

Read more

• Financial inclusion: from no-frills accounts to Jan Dhan, DBT and post-office savings