Page 41 - Banking Finance June 2022

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office structure to handle issues like, suitable technology banks: As BC is a third party, different inherent risks
finalisation, developing infrastructure like POS machines, which are associated with for the bank. Due to failure
establishment of connectivity, appointment of staff at in recoveries of small value loans given by BCs, dishonest
different levels for monitoring, co ordination & BCs, failure of technology these risks are associated
maintaining liaison with bank etc., will become late. with. Failure of BC leads to reputation loss for the bank.
iii. Inadequate procedures to appoint honest BCs in ii. Difficulty in assessing integrity of BCs: Honesty at
field: Integrity is of high value in successful every level is very important. Selection of honest BCs is
implementation. Corporate BCs while appointing a difficult task. Failure in monitoring branch staff on
individual BCs, to select honest individual belonging to BC point lead to diversion of funds by BC.
that particular location. It is a difficult task to establish
iii. Low income from BC operations: Corporate BCs, will
honesty at the initial stages.
take major portion of commission earned from bank and
iv. Low commission earnings: It will take lot of time to offer a very less percentage to individual BCs. During
establish a BC network, which earn ample commission initial stages, due to very low income he may not move
income. During early stages, due to low income, in lieu out also due to financial constraints. These twin factors
of high establishment expenditure, corporate BC may lead to diversion of BCs from main activity to others also
shut his operations. some times. BC need to bear operational expenditure
like, rents, electricity bills, etc., from his little earnings.
v. Inactive individual BCs: During early stages, people
may not trust the BCs as banking outlet and level of iv. Lack of professionalism: while appointing individual
operations also very less. Due to this bank may treat BCs, major thrust will be given to nativity, so finding
the BC location as in active BC if he is not operating for suitable person, giving training in the aspect of dealing
22 days in a month or atleast 200 transactions in a with customers is important. Professionalism brings trust
month. If more than 70% of the individual BCs are easily. Wearing uniform, dealing in a polite manner etc.,
active then only corporate BC will be treated as active need to be inculcated which is lacking in BC sometimes.
on daily basis.
Strategies for scaling up of BC model:
vi. Technology, infrastructure and training issues:
For Bank:
Selection of suitable software, purchase of POS
1. Board approved financial inclusion policy and a separate
machines in bulk involves high capital expenditure.
financial inclusion department at apex level and at all
Training to all individual BCs is also a major task during
controlling office levels for monitoring of BCs.
initial stages.
2. Appointment of experienced and prudent corporate BC
vii. Handling multiple services of different banks: BC may
enter in to different contracts with >1 bank, to offer 3. Suitable instructions to be given to corporate BC for
different services. It may lead to confusion among timely establishment of BC points with honest BCs,
individual BCs. procurement of POS machines, including giving advance
notice to bank well in advance if corporate BC wants to
At Individual BC level:
terminate relationship with bank, to implement
Credit, operational, legal, and reputation risk for banks BCP(Business continuity plan)
Difficulty in assessing integrity of the BCs 4. BC locations shall be identified by Banks, in such a way
Low coverage by individual BCs due to financial that they are within 5km radius from bank branch. It
constraints helps in providing uninterrupted or minimal disruption
service in the BC location.
Low income from BC operations associated with low
volume of business and high operational costs 5. Developing micro products which suit the needs of
financially excluded individuals. Now a day's needs of
Lack of professionalism
individuals are changing continuously, hence suitable
i. Credit, operational, legal, and reputation risk for products to be developed on continuous basis.

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