India’s banking agent network has declined, with outlets falling to 13.11 lakh in FY25 from 15.48 lakh in FY24. Low commissions and rising costs are driving agent attrition, forcing the Reserve Bank of India to propose a new, standardized compensation framework. For banks, this transition could lead to higher operational costs as they work to stabilize their essential rural service model.
India’s business correspondent (BC) network, which functions as the primary banking interface for rural and underserved regions, is experiencing a period of significant contraction. Recent data indicates that the number of banking outlets fell to 13.11 lakh in the fiscal year 2025, a notable drop from the 15.48 lakh outlets recorded in fiscal 2024. This trend highlights the growing operational strain on a model that has long been a pillar of the country's financial inclusion efforts.
The decline is largely driven by a challenging economic environment for the agents themselves. Many business correspondents, who act as the face of banks in remote areas, are finding the current commission structures unsustainable. With average monthly earnings under pressure, a significant number of agents are choosing to leave the sector for more predictable income opportunities in the urban gig economy. This attrition creates a gap in banking services, particularly in areas where traditional bank branches are absent or inaccessible.
RBI Proposes New Framework
To address these structural issues, the Reserve Bank of India released draft 'Branch Authorisation Amendment Directions' in April 2026. This proposal seeks to move away from the current, often informal, operational style by introducing a two-tier classification system. The new framework proposes dividing these service points into 'Business Correspondent-Banking Outlets' and 'Business Correspondent-Banking Touchpoints.'
Under this plan, the Banking Outlets would be expected to maintain fixed hours of operation, serving as more stable units, while Banking Touchpoints would handle more flexible service requirements. A critical part of this proposal is the push for a standardized remuneration model that includes both fixed and variable pay. The goal is to create a more reliable income structure for agents, which the regulator hopes will reduce turnover and improve the quality of service for rural customers.
Impact on Financial Institutions
For banking institutions, particularly those with a heavy reliance on the BC model to meet priority sector targets and financial inclusion mandates, this shift carries financial implications. If banks are required to offer higher, standardized commissions to retain their agent workforce, their operating expenses related to rural distribution could rise. This move is a strategic trade-off: while it may increase costs in the short term, a more stable agent network is essential for maintaining a strong presence in rural markets.
Investors monitoring banks with significant rural footprints should watch how these institutions adapt their cost structures. The transition phase, which remains ongoing as of November 2026, will require banks to balance the need for profitability with the regulatory push for a more formal and incentivized agent model. The long-term success of this overhaul will depend on the final implementation of these RBI guidelines and whether the new compensation benchmarks can effectively curb the current wave of agent attrition.