Relevance for UPSC: GS III (Indian Economy – Financial Inclusion), GS II (Governance); Source: RBI, The Hindu

Context

As per the Reserve Bank of India (Trend and Progress of Banking in India Report), Banking Correspondent outlets declined by about 2.3 lakh in Financial Year 2025, falling from 15.47 lakh to 13.10 lakh. This weakens India’s last-mile banking network, especially in rural and semi-urban areas.

What are Banking Correspondents?

Banking Correspondents are agents appointed by banks to provide basic services such as cash deposit and withdrawal, pension and subsidy delivery, and account servicing under financial inclusion programmes. They are crucial for villages without bank branches.

Why the Decline Matters

• Low and uncertain income due to transaction-based commissions
• Rising operating costs and digital compliance burden
• Bank withdrawal from low-profit rural locations
• Risk to Direct Benefit Transfer and welfare delivery

UPSC Value Box

• Linked scheme: Pradhan Mantri Jan Dhan Yojana
• Accounts served: Over 72 crore Basic Savings Bank Deposit Accounts
• Governance issue: Financial inclusion as social justice
• SDGs: SDG 1 (No Poverty), SDG 10 (Reduced Inequality)

Conclusion

The fall in Banking Correspondent outlets highlights a structural gap in financial inclusion. Making the model economically viable is essential to protect welfare delivery and inclusive growth.

Q. Banking Correspondents in India are primarily meant to:
A. Replace bank branches
B. Provide last-mile banking and welfare services
C. Regulate digital payments
D. Supervise cooperative banks

Correct Answer: B