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An Agent Success Framework – Part II : Are Agent Networks able to offer access to reliable CICO? 

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In the previous post in this series, we highlighted the challenges customers face when accessing CICO services. Here, our focus shifts to the supply side of the equation, exploring the literature detailing the issues CICO agents face in offering uninterrupted CICO services. Agents who provide CICO services often encounter significant obstacles that hinder their capacity to assist customers effectively.

The following section explores each of these concerns and their implications for the CICO network.

Profitability concerns

Agents in India earn much less than agents in other countries because the operating expenses in India are higher than in other South Asian countries and East African nations. These expenses are driven by devices to conduct transactions, the rent of the shop, electricity, and travel expenses for liquidity management, which constitute the bulk of operational expenses for agents[1]. Following a commission-based system, the bank pays business correspondents (BC) at a rate of 0.5% of the transaction value or Rs. 15, whichever is less. As BCs take on all the risks and equipment expenditures associated with this commission-based revenue model, it is challenging for them to maintain their business. Although the government was urged by the Business Correspondent Federation of India (BCFI) to either fix a monthly income for BCs[2] or set the commission at 1% of the transaction charge, this has yet not transpired[3].

The existing compensation structure for agents is unappealing, which has resulted in diminished confidence in the system and a breakdown of trust[4].  Business correspondents[5] (BCs) engaging in CICO activities are inadequately compensated for the risk associated with handling physical cash. Additionally, they receive no safety insurance, which places  tremendous psychological burden on them, and financial liability upon loss.  Insufficient compensation increases the load on the agents who already bear high set-up costs to also ensure the sustenance of their business, which restricts them to offering only subpar service quality, and limited access for the public.

In addition, considering the position of the business correspondent network managers (BCNMs), a costing study[6] conducted by Microsave (2015) on four BCNMs and their associated BC agents to ascertain the costs associated with providing financial services to the underbanked population in India revealed that the total channel costs for a BC outlet surpassed the combined revenue earned by both the BCNMs and BCs. Cost distribution varies across different models, with kiosk-based models incurring lower costs at the BCNM level than other models, however, the kiosk-based model’s BC-level cost was the highest. High-performing BC agents provide additional services that go beyond standard CICO products, such as insurance, fixed/recurring deposits, mobile top-ups, business facilitator services, etc. which could lead to increased business volumes, a critical factor in improving the viability and profitability of both BCs and BCNMs. The BCNMs’ establishment of a BC network was profitable in regions with active remittance corridors, but it was financially difficult for both BC and BCNM in regions with less business potential, which calls for a closer look at how much these service networks are costing.

Refusal of TDS exemptions

A provision in the Indian Income-tax Act, Section 194N, mandates TDS on cash withdrawals at the rate of 2% in case the aggregate cash withdrawal exceeds rupees one crore. An explicit provision, however, states that these provisions would not apply to any BC of a banking company. This was made to avoid casting an unfair burden on individuals and institutions handling substantial cash volume as part of business operations[7]. Although there is a provision in place that exempts BCs from TDS deductions, some banks have been observed to erroneously apply TDS policy to BCs who withdraw cash from banks other than their affiliated institutions. This is due to a flawed interpretation of the law, as the exemption is perceived to only apply to BCs associated with the issuer bank and not with other banks. As a result, BCs face significant capital blockage, which hinders their access to funds until they file their income tax returns and receive refunds[8].

GST Issues

Although the Central Board of Indirect Taxes and Customs (CBIC) has approved nil GST for rural and Pradhan Mantri Jan Dhan Yojana (PMJDY) account holders, this waiver is not utilized in remittance transactions because the Indian Financial System Code (IFSC) used for transactions does not differentiate between rural or PMJDY accounts. Consequently, banks and agents pay GST on all remittances to avoid any compliance issues[9]. This leads to an added burden for CICO agents who mostly operate in rural areas and play a key role in handling remittance transactions with PMJDY accounts. The GST that is incurred on such transactions poses an additional cost to them, further reducing their profit margins. Even though there is a GST waiver, in theory, it remains underutilized as the agents continue to pay the tax. This additional cost has a direct implication for their viability as a business, and in turn, hampers the spread of banking and financial services to less-profitable locations.

Insufficient liquidity management support

BC agents struggle with the lack of support for liquidity management because they must rely on their own funds and sporadic float support from distributors. Distributors serve as a link between the BCNM and the BC agents, working on behalf of the former. They are incentivised to onboard new agents and play a key role in scaling up the agent network. This has benefited new-age BCNMs in scaling up their businesses in different geographies by tapping into a network of distributors who assist merchants with BC operations[10].  The dropout of distributors can adversely affect their business operations, leading to a shortage of resources and a lack of liquidity[11].

Clearly, a variety of frictions exist in the agent’s business model. These frictions are related to and are likely the cause of some of the issues that customers face while accessing CICO services (see previous blog here). Resolving these pain points in the CICO model will require one to take a 360-degree perspective and incorporate the experiences of all relevant stakeholders. Accordingly, in the next post in this series, we unpack a conceptual framework called the ‘agent success framework’. This framework is intended to support key decision-makers in identifying where the CICO business can be made more accessible for the customer, and worthwhile for the agents and network managers.

Click here to access the Part I and Part III of the series.

[1] Wright, G. (2021, November 08). The agent profitability conundrum in India – time for differentiated agents? Retrieved March 31, 2023, from

[2] Manikandan, A. (2019, April 11). Business Correspondents’ Income Model based on commissions unviable. Retrieved March 31, 2023, from

[3] With a commission of RS 15, RBI’s business correspondents model might be failing government’s financial inclusion plans. (2020, November 25). Retrieved March 31, 2023, from

[4] Kale, S. (2021, March). Powering financial inclusion by strengthening the agent ecosystem – indicus. Retrieved March 31, 2023, from

[5] Business Correspondents or BCs are agents of banks, providing basic financial services to customers in areas where bank branches are not available.

[6] Balani, J. (2015, May). Microsave India focus note #115. Retrieved March 31, 2023, from

[7] I.T. Department Central Board of Direct Taxes (2021, January). Understand the TDS implication on cash withdrawals-194n. Retrieved March 31, 2023, from

[8] Valenti, F. (2021, July). Tax reforms to increase the viability of business correspondents. Retrieved March 31, 2023, from

[9] Kale, S. (2021, March). Powering financial inclusion by strengthening the agent ecosystem – Indicus. Retrieved March 31, 2023, from

[10] Microsave (2020, September). The rise of new-age BCNMs: Transformation of agent networks in India- Microsave. Retrieved April 6, 2023, from

[11] Bhavnani, D. (2022, April). Predominant cash-in cash-out (CICO) models in India – Microsave. Retrieved March 31, 2023, from

Cite this blog:


D’cruze, N. A. (2023). Are Agent Networks able to offer access to reliable CICO? . Retrieved from Dvara Research.


D’cruze, Natasha Agnes. “Are Agent Networks able to offer access to reliable CICO? .” 2023. Dvara Research.


D’cruze, Natasha Agnes. “Are Agent Networks able to offer access to reliable CICO? .” 2023. Dvara Research.


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