Coronavirus: Rural India to face cash shortage amidst lockdown, says BCFI
BCFI estimates a cash shortage to arise in rural areas due to the lockdown to curb coronavirus as Business Correspondents are restricted from travelling.
The Business Correspondent Federation of India (BCFI), a body representing fintech companies working towards the delivery of financial services to underbanked and unbanked, on Friday discussed challenges arising in the rural economy after the Indian government announced a national lockdown to curb the spread of COVID-19 in the country.
Members of the BCFI also estimate a cash shortage to arise in rural areas of the country as Business Correspondents (also called ‘Bank Mitra’) are restricted from travelling.
“Bank Mitras cannot travel freely despite the services provided by them coming under the ‘essential service’ category as approved by the Home Ministry. Despite authorisation, Bank Mitras are still facing harassment from local authorities, with the police forcing these individuals to shut their establishments and outlets,” said Seema Prem, Co-founder, FIA Technology Services.
The industry body estimated that due to this forced shutdown, only 30 percent of their Business Correspondents are active in rural regions, putting additional operational load on the players.
Post the announcement of the lockdown on Tuesday, the Ministry of Home Affairs came out with a comprehensive list of essential services that will remain operational during the nationwide lockdown.
The addendum to these guidelines included Business Correspondents (in sub-clause B to clause 4) along with IT Vendors for banking operations and cash management agencies as essential services.
Additionally, members also said that owing to the lockdown rural banks were rationing cash putting more pressure on the liquidity provided to the rural economy.
Why is this critical?
According to BCFI, more than 70 percent of India’s population resides in rural areas.
Of this, five percent of rural India which is about 30,000 of the 6.5 lakh villages have access to ATMs, making the role of BC Agents (retails outlets such as kirana stores, medical stores etc.) crucial in accessing basic banking services such as cash deposit or cash withdrawal.
“There are about two lakh ATMs in the country. Of this, one lakh are on-site, which means that these ATMs are next to bank branches. Of the balance one lakh, 25,000 are ATMs in rural areas which aren’t being serviced, making operations of Business Correspondents even more critical," explained Sunil Kulkarni, Chief Business Mentor - Oxigen Services India Private Limited and Board Member, BCFI.
Additionally, Finance Minister Nirmala Sitharaman just yesterday announced Rs 1.7 lakh crore relief package for the economically weaker sections of the society (through Direct Benefit Transfer).
According to BCFI, the inability of BC agents to access this relief cash is a huge concern in ensuring this package reaches the beneficiaries.
Currently, BC agents are spread across more than 17,000 PIN codes in India through more than 10 lakh retail shops including kirana stores, medical stores etc.
Suggested relief for Business Correspondents
The industry body has appealed to the government for financial support as these business correspondents are risking their own lives to rise to the challenge of COVID-19.
These correspondents are struggling to keep businesses afloat among higher operation costs and low cash availability, according to BCFI.
The industry body also assured that while adequate precautions are taken, these BCs are incurring additional costs in terms of masks, hand sanitizer, intermittent shop sanitisation to protect themselves and their customers.
While addressing the media, through a digital mode, Anand Kumar Bajaj, MD and CEO of PayNearby and Board Member of BCFI said,
“We urge the government to provide a small remuneration of Rs 5,000 for three months to Business Correspondents to boost their morale and ensure that financial services are catered to in a seamless manner for the rural regions in the country.”
Other members addressing the media were Sasidhar Thumuluri, MD and CEO of Basix Sub-K iTransactions Limited and Chairman of BCFI; Amit Jain, Chief - Business Operations of Fino Payments Bank, and Vijay Pratap Singh Aditya, CEO of Ekgaon Technologies.
(Edited by Saheli Sen Gupta)