Banking correspondent outlets down 2.3 lakh in FY25: RBI data, Pg12

Key Highlights:

• The number of Banking Correspondent (BC) outlets in India decreased by 2.30 lakh in FY25, from 15.47 lakh in FY24 to 13.10 lakh, according to RBI data.
• The majority of BC closures occurred in villages with populations exceeding 2,000, raising concerns about the sustainability of financial inclusion efforts.
• There are 72.42 crore Basic Saving Bank Deposits Accounts (BSBDA) as of FY25.
• The Maharashtra State Bank Mitras Association (MSBA) attributes the decline to policy-related shortcomings, including low remuneration and high operating costs.

Detailed Insights:

• The decline in BC outlets reverses a previous increase from 5.41 lakh in 2020 to 15.47 lakh in 2024, impacting access to basic banking services in rural areas.
• BCs depend on commissions that are often inadequate to cover operating expenses like rent, electricity, and cybersecurity, making the model unsustainable in low-population areas.
• The RBI is reviewing the Business Correspondent model and the Kisan Credit Card (KCC) scheme as part of its financial inclusion initiatives.
• The withdrawal of BC outlets deprives vulnerable populations of essential services such as cash withdrawals, deposits, account updates, pension disbursements, and grievance redressal.
• The MSBA warns that the current policy framework has made the BC model economically unviable, especially in sparsely populated rural areas.
• Disruptions to the BC network could negatively impact the Direct Benefit Transfer (DBT) ecosystem, which relies on these outlets for last-mile delivery.
• Banks are retreating from their social obligations, and the RBI and government must reform the policy framework to ensure sustainable banking access in rural areas.
• BCs are retail agents appointed by banks to deliver basic banking and financial services outside traditional channels, playing a critical role in advancing financial inclusion.

Key Concepts Involved:

• Banking Correspondent (BC): Retail agents appointed by banks to provide basic banking services in areas lacking traditional bank access.
• Financial Inclusion: Efforts to make financial services accessible and affordable to all individuals and businesses, especially those in underserved communities.
• Direct Benefit Transfer (DBT): A mechanism to transfer subsidies and benefits directly to beneficiaries' bank accounts, improving efficiency and reducing leakages.