India has over 2.5 million BC agents extending banking to its remotest corners yet the industry treats them as a distribution cost rather than an economic asset. That framing needs to change. Tasked with bringing formal banking services to underserved areas, these agents have become a primary point of contact for millions of unbanked and underbanked citizens in rural and remote regions. By helping to address gaps in geography, infrastructure and trust the BC framework has become an established part of India’s approach to inclusive economic growth.

Looking ahead, there is an opportunity to reconsider how the BC industry is viewed. Seeing it primarily as a social responsibility initiative may not fully reflect its potential or its economic significance. Supporting BC agent welfare is not social responsibility it is an investment in last-mile economic infrastructure with measurable returns.

A key feature of the BC model is its structure. By allowing banks to partner with local individuals and entities, the system helps manage the costs associated with traditional bank branches in areas with low population density or lower incomes. This model, formalised under the Reserve Bank of India’s (RBI) guidance, has been a primary channel for delivering government schemes, from the Pradhan Mantri Jan Dhan Yojana (PMJDY) to cash relief during the COVID-19 pandemic.

The BC channel has contributed to the expansion of India’s financial inclusion programmes. Under the PMJDY, total accounts reached 578 million as of February 25, according to government data. More than 55% of Jan Dhan accounts are held by women, while nearly 78% are located in rural and semi-urban areas, indicating the broad reach of the scheme launched in 2014.

Financial Inclusion efforts have extended beyond basic banking. Enrolments under the Pradhan Mantri Jeevan Jyoti Bima Yojana have reached 268.8 million, while 571.1 million individuals are covered under the Pradhan Mantri Suraksha Bima Yojana. The Atal Pension Yojana has recorded over 88.4 million subscribers.

These agents are often members of the communities they serve and this local connection is central to the model's functioning. For rural customers who may find traditional bank environments unfamiliar, interacting with a local agent can help reduce hesitation. This familiarity can help lower a psychological barrier to entry. Field experience consistently shows that rural customers often hesitate to enter formal banking unfamiliar procedures, language barriers, and a sense that their savings are 'too small' keep them out. A BC agent, as a neighbour who speaks the local language, can help build the trust needed to bring them into the formal financial system.

A strong BC network can have effects beyond opening savings accounts. The provision of micro-credit through these agents has supported rural entrepreneurship, helping some customers start or expand small businesses. This can create a multiplier effect the BC channel provides a livelihood for its agents while also contributing to economic activity among its customers, which may improve the economic standing of communities.

Additionally, the industry is adapting to India's digital shift. With rising smartphone ownership and wider internet access, BC agents are increasingly moving from paper-based processes to digital enrollments using Aadhaar-enabled Payment System (AePS) and e-KYC technologies. This transition has improved efficiency and reduce costs, contributing to the model's sustainability. Many agents have shown a preference for digital training modules over traditional methods.

Despite these contributions, the BC industry faces certain systemic challenges that can limit its growth. Addressing these could help unlock more of its potential.

First, there is a lack of structured ongoing capacity building. A significant number of agents nearly half offer only one or two services, primarily Cash-In-Cash-Out (CICO) transactions. While these are in demand, they represent only a portion of the services agents could potentially provide. Second, the industry faces challenges related to centralized monitoring and data analysis. Much of the data generated by the network remains unstructured, representing a missed opportunity to gain insights, inform policy and understand training gaps. The absence of a shared database for fraud and risk management also creates vulnerabilities. A BC agent dismissed for fraud by one corporate BC network may potentially join another without their history being known. This can lead to financial losses and affect trust in the model.

To address these challenges RBI came out with National Strategy for Financial Inclusion 2025-30 (Financial Inclusion 2.0). The paper talks about proper financial training in areas like insurance, recurring deposits and pension schemes where as of now agents may lack the confidence to offer these products. The paper stresses on to make the BC model more viable, expanding the product portfolio and training agents to generate income from a wider range of services including non-CICO products like mutual funds could be considered.

To support a more inclusive financial system, there may be value in shifting focus toward strengthening the operational framework, with the BC agent as a key part of that structure. Making the BC industry more attractive for investment could be seen as an investment in last-mile economic infrastructure. This might involve funding scalable training programmes to help agents move from a transactional role to a relationship-based one. It could also mean developing systems to monitor fraud, protect consumers, and maintain the integrity of the channel. Using technology for data analytics to inform policy and help prevent fraud is another area of potential.

In summary, in Financial Inclusion 1.0, BC agents in India serve a functional role in extending financial services. They contribute to building trust, supporting rural entrepreneurship, and facilitating access to banking. Now going forward in Financial Inclusion 2.0, supporting their welfare, skills, and security can be considered a practical economic consideration one that aligns with the goal of building a more inclusive financial system.