Growth of India's Business Correspondent Sector Projected to Reach Rs 147 Billion by FY25

A recent report by BLS E-Services predicts that the Business Correspondent (BC) sector in India will exceed Rs 147 billion by the financial year 2025, achieving a notable compound annual growth rate (CAGR) of 19 percent. This growth is largely attributed to the expansion of the Pradhan Mantri Jan Dhan Yojana (PMJDY), wider availability of Basic Savings Bank Deposit Accounts (BSBDAs), and the increasing reliance on Direct Benefit Transfer (DBT) programs that send financial aid directly to those in need.

Business Correspondents serve as representatives for banking institutions, providing necessary financial services in remote and underserved regions. They operate on a commission basis, functioning as intermediaries that facilitate the delivery of banking services to individuals, with their earnings ranging from fixed fees to a portion of transaction amounts based on specific services rendered.

The BC industry has experienced substantial growth, increasing from Rs 47 billion in FY2018 to Rs 102 billion in FY2023. The surge in formal financial service adoption among rural households has led to higher transaction volumes, particularly in areas lacking physical bank branches.

According to Shikhar Aggarwal, Chairman of BLS E-Services, there are over 1.35 million BC agents currently working across India. These agents support millions, especially in rural communities, by enabling access to vital banking activities such as cash deposits, withdrawals, remittances, bill payments, Aadhaar-enabled services, and microfinance lending, thus bridging the gap between formal banking systems and underserved populations.

Furthermore, the increase in BSBDAs under PMJDY has significantly bolstered the sector's growth. The report anticipates that the number of BSBDAs will rise from 380 million in 2020 to over 550 million by FY2025, with most of these accounts belonging to rural clients. Transactions such as DBT benefit disbursements, cash withdrawals, and remittances predominantly occur through BCs with Aadhaar authentication.

Lokanath Panda, COO of BLS E-Services, noted the forecasted growth of the BC industry between FY22 and FY25P, predicting an increase from Rs 102.9 billion to Rs 147.4 billion. The expansion of rural BC outreach, growth in BSBDA accounts, heightened transaction volumes, and increased use of DBT schemes are key factors driving this growth.

Additionally, technological advancements have reinforced the BC model, with platforms like UPI, Aadhaar-enabled Payment Systems (AePS), RuPay, and IMPS, alongside mobile banking applications, enhancing the security and accessibility of financial transactions, even in remote areas of the country. According to data from the National Payments Corporation of India (NPCI), over 520 million AePS transactions are conducted monthly, with Business Correspondents playing a crucial role in this burgeoning volume.