Individual or Institutional BCs: The Banker's Perspective

This Note discusses banks’ perceptions of institutional and individual business correspondents (BCs) in India. It examines how banks might choose between the two approaches, by using various decision parameters, including customer acquisition and outreach, customer relationship and retention, control and resources.

A bank can use these parameters to decide which agent model to use and to actually select agents or the BCNM partner. Banks must decide if they have the resources to monitor and manage agents directly and closely enough to ensure success. For instance:

• Many large Indian banks work in remote areas and may need to use third-parties to further extend their reach;
• Smaller banks, such as regional rural banks, might consider appointing individuals, who know the area well;
• Other banks have chosen the middle path by both managing individual agents directly and using a BCNM, whose responsibilities are limited to managing the initial selection and training.

The paper concludes that some agent network structures evolve over time. A case in point is M-PESA, whose relationship with its agents has evolved from a direct relationship to a tiered approach.