Rural Banking Crisis: 2.3 Lakh BC Outlets Closed
The recent report from the Reserve Bank of India highlights a concerning trend in rural banking services. The total number of Banking Correspondent (BC) outlets has dropped significantly, by 2.3 lakh, from 15.47 lakh in FY24 to just 13.10 lakh in FY25. This decline threatens the efforts made towards financial inclusion, especially in villages where access to banking is crucial for the economically weaker sections of society.
Banking Correspondents serve as the last-mile delivery agents for banking services, particularly in remote and unbanked areas. The closures are especially alarming for villages with populations exceeding 2,000, where residents heavily rely on these services for basic transactions like cash withdrawals, deposits, and government welfare disbursements.
Data shows that while the number of BCs surged dramatically from 5.41 lakh in 2020 to 15.47 lakh in 2024, the sustainability of this model is now in question. Urban BC outlets have also seen a decline, indicating broader issues within the banking system. Bankers have pointed out that the financial viability of BCs is becoming increasingly challenging due to rising costs and insufficient commissions.
As operational costs rise, including expenses for biometric devices, cash management, and cybersecurity, the earnings of BCs remain modest, particularly in smaller villages. This mismatch puts immense pressure on the BC model, leading to closures and reduced service availability.
The Maharashtra State Bank Mitras Association (MSBA) has attributed this alarming decrease to policy-related shortcomings, emphasizing that the current framework governing BC operations is inadequate and unsustainable. They have called for urgent reforms to address low remuneration and high operational costs.
With the RBI currently reviewing the BC model and related policies, it is crucial for all stakeholders—including the government and banking institutions—to revisit these frameworks. Without timely interventions, the risk of disrupting the Direct Benefit Transfer ecosystem looms large, which is vital for delivering resources to rural populations.
In conclusion, ensuring sustainable banking access in rural areas is not merely a financial obligation but a social responsibility. If immediate actions are not taken, the gap in financial services will only widen, further deepening rural distress and inequality in India.
