Financial Sustainability of Business Correspondent Model in Mirzapur District (Uttar Pradesh, India)

Abstract

Achieving financial inclusion through brick and mortar banks is a complicated task because of the huge operational cost and infrastructural issues involved in it. In recent years an innovation in the form of Business Correspondent (BC) model has evolved. It attempts to accelerate the pace of financial inclusion in the Indian banking system. Business correspondent channel essentially involves using third-party agents as a tool to carry out the banking operations on behalf of the banks, the latter being the regulatory and controlling agency for the business correspondent operations. Using primary data collected from the BCs operating in the Mirzapur district of Uttar Pradesh, the present study attempts to explore the determinants that affect the financial sustainability of the BC model in India. It concludes that if the BC model has to be financially sustainable, then continued generation of transactions backed by proper training facilities is a must. Further, the BCs need to take up more area-specific approach to deal with the challenges confronting them.