Centre plans to bring banking services within 3 km radius for every citizen, India Post to play key role

Accordingly, a proposal is being prepared by the Department of Financial Services (DFS) and the Department of Posts (DoP) to provide banking services within a 3-km radius for all citizens, with India Post’s extensive network of over 150,000 rural post offices expected to play a central role, two people directly involved in the process told Mint on the condition of anonymity.

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The move championed by the Inter-State Council, chaired by home minister Amit Shah, comes as part of the government’s broader financial inclusion agenda aimed at improving access to formal banking, especially in rural and remote areas where traditional bank branches and ATMs are scarce. This assumes significance given that India has around 600,000 villages and 270,000 village panchayats.

“As part of the plan, panchayats and villages located within a 3-km radius will be identified, and banks directed to start their operations in these areas," said the first among the two people mentioned above.

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Brick-and-mortar infrastructure will be a must for these banking points. The delivery model will also involve business correspondents from banks, state-run ePoS (electronic point-of-sale) systems, and coordinated efforts among central and state agencies to ensure that no citizen is left outside the formal banking net.

“Reducing the distance for accessible banking services from 5km to 3km is a significant step forward in improving financial inclusion," said Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat.

“This move offers three clear benefits. First, it boosts customer convenience by making banking services more easily accessible, which encourages higher usage. Second, closer proximity enables branch personnel to better understand customer behaviour, especially useful in assessing creditworthiness where historical data may be limited. Third, it helps build long-term trust—personalized service made possible by nearby branches strengthens relationships between banks and customers, creating a more sustainable and inclusive banking ecosystem," said Iyer.

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“The Department of Posts (DoP) will work in close coordination with state governments to provide banking services on designated days, based on an assessment of the local requirements," said the second person.

These will offer basic banking services through the India Post Payments Bank (IPPB) and Unified Payments Interface (UPI), among other platforms. The government is also working on a system to map banking needs in these locations to ensure targeted service delivery, they said.

As per the policy framework, public sector banks would be tasked with expanding their banking correspondent networks and making services available across wider areas, including Maoist-affected areas.

India Post would coordinate with state governments to deliver these services in alignment with weekly campaigns such as polio vaccination drives, immunization programmes, and awareness campaigns run by various departments.

The model under consideration involves identifying habitations without good access, and ensuring that at least one person is available on designated days to facilitate transactions for locals.

“It’s a welcome move. Bringing banking services within a 3-km radius will strengthen the formal economy and improve access to government schemes like DBT, PM-Kisan, and MGNREGA. It will reduce reliance on middlemen, promote transparency, and encourage rural savings and digital transactions," said Abhash Kumar, an economist at Delhi University.

“It won’t be an open-air operation—seating and security arrangements will be made in coordination with local panchayats. The idea is to ensure a safe and accessible location for postal department staff, who would be carrying ePoS machines, some cash for disbursal, and other essentials. The department may designate a common public place in villages—such as the panchayat bhawan—for providing these banking services," said the second person.

Queries sent to the spokespersons of ministries of finance and home affairs as well as secretary of postal department remained unanswered at press time.

There is no data available on the number of unbanked villages within a 3-km radius. The government is in the process of finding the numbers.

As per data submitted in the Sabha on 10 March, out of the total 601,328 inhabited villages in the country, 600,750 (99.90%) villages are covered with banking outlets (bank branch/BC/IPPB) within a radius of 5km.

According to the NABARD All India Rural Financial Inclusion Survey (NAFIS) 2021-22, which was released in October 2024, around 34% of rural households still lack access to banking services.

According to finance ministry data, India has 578 villages without a banking outlet within a 5-km radius. The highest numbers are in Arunachal Pradesh (123), Manipur (108), Chhattisgarh (58), Maharashtra (34), and the Andaman & Nicobar Islands (36). In Gujarat, the home state of Prime Minister Narendra Modi, there are 21 such villages.

In contrast, several states such as Bihar, Delhi, Kerala, Punjab and West Bengal have full banking coverage, with no unbanked villages within a 5-km radius.