India's ambitious financial inclusion drive has hit a major roadblock, with nearly 2.30 lakh last-mile banking service points vanishing in a single year. New data from the Reserve Bank of India (RBI) paints a worrying picture of a contracting rural banking network, raising urgent questions about the sustainability of reaching the unbanked.
A Sharp Contraction in Last-Mile Banking Access
According to the RBI's 'Trend and Progress of Banking in India' report, the total number of Banking Correspondent (BC) outlets across the country plummeted to 13.10 lakh in FY25 from 15.47 lakh in FY24. This decline of approximately 2.30 lakh outlets marks a significant reversal from the rapid expansion seen earlier, where BC numbers surged from 5.41 lakh in 2020 to the 2024 peak.
Banking Correspondents are retail agents authorized by banks to provide basic services like cash withdrawals, deposits, and account updates in remote and unbanked areas, acting as a critical bridge where traditional branches cannot reach. The data indicates that villages with populations exceeding 2,000 have borne the brunt of these closures.
Economic Unsustainability Drives the Decline
Bankers and industry associations point to a broken economic model as the core reason for the mass shutdowns. The Maharashtra State Bank Mitras Association (MSBA) has squarely blamed policy shortcomings for the "alarming decline."
"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," the association stated. Davidas Tuljapurkar, President of MSBA, warned that the entire Direct Benefit Transfer (DBT) ecosystem, which relies on BCs for last-mile delivery, faces the risk of serious disruption if corrective measures are not taken immediately.
Officials explain that BC earnings are tightly linked to transaction volumes, which remain modest in smaller villages. However, they must bear fixed and rising costs for rent, electricity, biometric devices, cash handling, cybersecurity, and network connectivity regardless of business levels. This unsustainable squeeze on margins has forced many to shut shop.
Consequences for Rural Communities and the Future
The withdrawal of these outlets has a direct and severe impact on rural populations. Villages are home to economically weaker sections, senior citizens, small farmers, migrant families, and beneficiaries of government welfare schemes. They are now increasingly deprived of access to essential services like pension disbursements, cash withdrawals, and grievance redressal.
This contraction is particularly stark against the backdrop of a vast number of basic bank accounts. The RBI reports there are 72.42 crore Basic Saving Bank Deposit Accounts (BSBDA) as of FY25, highlighting the scale of potential disruption.
In response to the crisis, the RBI has indicated it is reviewing the Business Correspondent model along with the Kisan Credit Card (KCC) scheme as part of its financial inclusion initiatives. Stakeholders are calling for an urgent policy revamp involving the RBI, the Government of India, and banking institutions to create a sustainable framework.
"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," emphasized Tuljapurkar. The future of financial inclusion in India's hinterlands now hinges on swift and decisive corrective action.
