Business correspondent model is faced with persistent hurdles

The business correspondent model has proven to be a game-changer in rural financial inclusion, but it faces persistent hurdles. “Key among them is the viability of operations in low-footfall regions, where transaction volumes may not justify costs. Infrastructure gaps—such as unreliable connectivity and limited access to electricity—also hinder service quality,” says Ajeet Kumar Singh, Co-Founder & Managing Director, SAVE Solutions in an exclusive interaction with Bizz Buzz.

What are the biggest challenges facing the business correspondent (BC) model in rural India today?

The BC model has proven to be a game-changer in rural financial inclusion, but it faces persistent hurdles. Key among them is the viability of operations in low-footfall regions, where transaction volumes may not justify costs. Infrastructure gaps—such as unreliable connectivity and limited access to electricity—also hinder service quality. Moreover, trust-building remains a slow process, especially in communities with limited financial literacy. Attrition of BC agents and lack of ongoing training further impact continuity and customer satisfaction. Ensuring timely compensation, stronger support mechanisms, and digital capacity building are critical to sustaining the model’s effectiveness.

How is technology transforming microfinance and last-mile banking in India’s underserved regions?

Technology is revolutionizing microfinance and last-mile delivery by making services faster, more secure, and more inclusive. Digital KYC, Aadhaar-based authentication, and mobile-enabled transactions have drastically reduced onboarding time and operational costs. Real-time data tracking helps monitor borrower behavior and improve risk management. Mobile apps and cloud-based MIS systems also enable field agents to service clients on the go. Moreover, digital financial literacy tools are helping rural customers become more confident in using formal channels. In essence, technology has become the backbone for scaling outreach while maintaining transparency and efficiency in last-mile banking.

In what ways can the NBFC sector further support India's goal of comprehensive financial inclusion?

NBFCs can play a vital role by innovating customized financial products tailored to the income cycles and livelihood patterns of rural households. Expanding into untapped geographies through lightweight branch models or digital channels will widen reach. Collaborations with self-help groups, FPOs, and NGOs can strengthen community ties and reduce credit risk. Moreover, NBFCs must invest in customer education and grievance redressal to build long-term trust. Flexible underwriting models based on alternate data sources—such as utility payments or group guarantees—can also bring first-time borrowers into the fold of formal finance.

What regulatory or policy changes do you believe are most urgently needed to empower NBFCs and MFIs to serve rural and semi-urban populations more effectively?

There is a strong case for differentiated regulatory frameworks for rural-focused NBFCs and MFIs, which operate under vastly different conditions compared to urban players. Priority sector lending support, access to low-cost funding lines, and simplified KYC norms—especially for small-ticket loans—are critical. Encouraging co-lending models with banks under a clearly defined risk-sharing structure can also improve capital flow. Additionally, policy support for digital infrastructure in rural areas will enhance the reach and impact of NBFCs and MFIs operating at the grassroots level.

How are NBFCs adapting their credit assessment models to cater to the unique financial behaviors and risks associated with underserved customer segments?

NBFCs are moving beyond traditional credit scoring by incorporating alternative data sources into their assessment frameworks. These include repayment behavior on utility bills, mobile recharges, group lending dynamics, and even social scoring models. The use of JLG (Joint Liability Group) frameworks remains effective for women borrowers in rural India. Many NBFCs are also digitizing field operations, enabling real-time data collection and verification. Such models reduce dependency on formal documentation, making credit accessible to those previously excluded from the system while maintaining asset quality.

What role do partnerships between NBFCs, fintech companies, and traditional financial institutions play in scaling microfinance initiatives across India?

Strategic partnerships are essential to scale and sustain microfinance initiatives. Fintech companies bring technological innovation, digital interfaces, and AI-driven credit models, while NBFCs contribute last-mile reach and local market knowledge. Traditional financial institutions provide capital and regulatory expertise. Together, these synergies allow for faster onboarding, efficient servicing, and broader product diversification. Co-lending partnerships also enable risk-sharing and bring down the cost of capital, which can be passed on as affordable credit to end users. Such ecosystems are instrumental in expanding the formal financial net across rural and semi-urban India.

SAVE Solutions has established a vast network of over 14,000 CSPs—how has this reach impacted financial inclusion in rural India?

The expansive footprint of over 15,000 Customer Service Points (CSPs) operated by SAVE Solutions has significantly deepened financial inclusion across rural India. By serving approximately 23 million individuals in over 8600 villages, the company has empowered unbanked populations to access essential financial services, such as savings accounts, direct benefit transfers, insurance, remittances, and microcredit. With an average daily footfall of 4–5 lakh customers, SAVE has not only built trust in formal banking but has also created thousands of rural employment opportunities. Its one-stop model for financial services has allowed underserved individuals to participate more actively in the economic mainstream.

With multiple NBFC subsidiaries under its umbrella, how does SAVE ensure seamless integration and service delivery across its varied financial products?

SAVE ensures cohesion across its NBFC subsidiaries—spanning microfinance, MSME lending, housing finance, and asset-side BC operations—through a centralized, tech-enabled ecosystem. Its in-house IT infrastructure and integrated MIS allow for real-time monitoring, efficient fund management, and quick grievance redressal. Additionally, a well-trained workforce of over 30,000 (including on-roll and off-roll employees) enables smooth execution across regions and functions. By operating under a shared vision and unified governance model, the subsidiaries deliver diversified yet complementary financial products, ensuring that customers experience a consistent, responsive, and streamlined service journey.

EoM.