Which of the following is not a challenge faced by business correspondents model ?

The correct answer is - Physical proximity and access with customers

Key Points

• Physical proximity and access with customers
  • Business Correspondents (BCs) are specifically designed to ensure proximity and access to customers in remote areas.
  • The model involves individuals or entities acting as representatives of banks, making services available at the doorstep of rural and underserved populations.
  • This feature makes physical proximity a core strength of the BC model, rather than a challenge.

Additional Information

• Challenges faced by the Business Correspondents model
  • High maintenance cost: The operational expenses of maintaining BC infrastructure, paying commissions, and handling cash logistics can be significant.
  • Small size of transactions: Many BCs deal with low-value transactions, reducing profitability and sustainability.
  • Low telecommunication access: Remote areas often lack reliable telecommunication networks, hindering real-time banking operations through BCs.
  • Other issues: Insufficient training, lack of financial literacy among customers, and cash management challenges can also impact the BC model.
• Importance of the BC model
  • It is a vital approach to achieving financial inclusion in rural and underbanked regions.
  • BCs provide services such as account opening, cash deposits and withdrawals, fund transfers, and microinsurance.
  • The model supports government initiatives like the Pradhan Mantri Jan Dhan Yojana by expanding banking reach.