Last-mile bank services impacted as 2.3 lakh Banking Correspondent outlets disappear; villages hit hardest: RBI data

The total number of Banking Correspondent (BC) outlets — last-mile delivery agents providing banking services in remote and unbanked areas — has declined by nearly 2.30 lakh to 13.10 lakh in FY25, from 15.47 lakh in FY24 across the country, according to RBI data.

This marks a significant contraction in the rural banking footprint and raises fresh concerns over the sustainability of financial inclusion efforts. A majority of these closures have occurred in villages whose population exceeds 2,000, according to data from the Reserve Bank of India’s Trend and Progress of Banking in India report released on Monday.

The decline happened after the number of BCs spurted from 5.41 lakh in 2020 to 15.47 lakh in 2024. BCs in urban locations fell from 6.35 lakh in 2020 to 3.06 lakh in 2024 and remained marginally higher at 3.09 lakh in 2025, RBI data shows.

Bankers said the BC framework has been steadily weakening, with sustainability becoming a major concern, particularly in rural and low-population areas. BCs largely depend on commissions that are often inadequate to meet routine operating expenses. “Earnings are linked to transaction volumes, which remain modest in smaller villages. However, fixed costs such as rent, electricity, connectivity, equipment and travel have to be incurred regardless of business levels, putting severe pressure on margins,” said an official at a public sector bank.

The official said that operating expenses for BC outlets have risen sharply over the past few years, with higher spending on biometric devices, cash handling arrangements, cybersecurity safeguards and network connectivity, without a matching increase in commission income.

The RBI has indicated that it is in the process of reviewing the Business Correspondent model and the Kisan Credit Card (KCC) scheme “as part of financial inclusion initiatives”.

Villages are predominantly home to economically weaker sections, senior citizens, small and marginal farmers, migrant families and beneficiaries of government welfare schemes. With the withdrawal of BC outlets, residents are increasingly being deprived access to basic banking services, including cash withdrawals and deposits, account updates, pension disbursements and grievance redressal.

There are 72.42 crore Basic Saving Bank Deposits Account (BSBDA) as of FY25, according to the RBI.

The Maharashtra State Bank Mitras Association (MSBA) has attributed the “alarming decline” in BC outlets to policy-related shortcomings.

“The responsibility for this situation squarely lies with policy decisions,” the association said in a statement. “The existing policy framework governing BC operations — marked by low remuneration, high operating costs, technological instability and inadequate institutional support — has rendered the BC model economically unviable, especially in sparsely populated rural areas.”

Business correspondents are retail agents appointed by banks to deliver basic banking and financial services outside traditional channels such as bank branches and ATMs. By enabling banks to offer a limited range of low-cost services, BCs have played a critical role in advancing financial inclusion, particularly across India’s nearly 6 lakh village habitations. They serve as a vital last-mile link, facilitating the delivery of financial services to millions of customers. While the RBI doesn’t have any minimum or maximum staff strength for a BC, banks allow BCs to appoint sub-agents.

BCs are being forced to shut shop, while banks are steadily retreating from their social obligations, the association said. “It is imperative that all stakeholders — the Reserve Bank of India, the Government of India and banking institutions — urgently revisit and reform the existing policy framework,” said Davidas Tuljapurkar, president, MSBA.

He warned that unless corrective measures are taken immediately, the entire Direct Benefit Transfer (DBT) ecosystem — which relies heavily on BC outlets for last-mile delivery — faces the risk of serious disruption and eventual collapse. “Ensuring sustainable banking access in rural and remote areas is not a choice but a constitutional and social responsibility. Any further delay will only widen inequality and deepen rural distress,” he said.

While the services provided by BCs must fall within the scope of a bank’s regular banking activities, these are carried out by the BC or its sub-agent at locations other than the bank’s own premises. A BC or its retail outlet is permitted to represent and offer services for only one bank.

Under the current arrangement, a banking correspondent is authorised to accept and disburse cash either at the place of business or at another suitable location, subject to per-day and per-customer limits specified by the bank. Each BC is attached to a nearby bank branch, known as the base branch, which oversees its operations. The contractual terms governing the relationship between the bank and the BC are required to be clearly defined in writing and subjected to appropriate legal vetting.