Is the Business Correspondent Model in Policy Paralysis?

MicroSave's Policy Brief No. 7 examines the recent shift in policy direction for the business correspondent model in India and the associated challenges and potential consequences from a consumer standpoint. It highlights detailed scenario analysis of different business correspondent agents' (BCAs') current and prospective earnings in a range of situations, for both individual and business correspondent network manager (BCNM)-managed agents. The brief states that the blurred dividing line and tension between the roles of the regulator and activist governments can sometimes lead to undesirable consequences. Conclusions include:

• New selection process using a reverse auction approach takes no notice of consumer needs and aspirations for a wider range of products, differentiated services, quality, and service continuity;
• Pricing is still fixed and does not recognize consumer willingness to pay market driven prices for quality products and services;
• Prescriptive nature of reverse tender documents blocks off avenues for innovation as well as remuneration according to real cost of delivery;
• BCAs are likely to see reductions in their already limited and precarious incomes suggesting that agent churn is likely to further increase.