New Delhi, June 26 -- The Union finance ministry has asked public sector banks (PSBs) to accelerate their rural expansion and ensure access in villages with a population of more than 3,000, according to two people aware of the development. The government's push to strengthen state-owned lenders' rural presence and protect their customer base comes as private banks, small finance banks, and digital financial service providers steadily expand beyond urban markets. The focus is on ensuring larger rural habitations remain adequately served by bank branches, which continue to play a critical role in deposit mobilization, lending, and the implementation of government welfare programmes, said one of the two persons cited above. "As part of the exercise, banks were asked to open 576 branches in villages with a population exceeding 3,000 in FY26. Of these, 511 branches have already been opened, while 65 are yet to become operational," said the second person. Mint's emails to the finance ministry, Reserve Bank of India, Indian Banks' Association, 12 PSBs, ministry of rural development, ministry of panchayati raj remained unanswered. The push builds on the Centre's efforts to strengthen banking infrastructure in unbanked and underbanked rural areas. India had around 640,000 villages according to the 2011 census, of which nearly 597,000 were inhabited. While a majority of villages are small habitations, larger villages with populations above 3,000 serve as important economic centres for surrounding rural areas and generate sufficient banking activity to support branch operations. Despite rapid growth in digital banking and Unified Payments Interface-based transactions, physical branches remain essential for deepening financial inclusion, said a senior banking official on the condition of anonymity. "Rural customers continue to depend on branches for opening accounts, availing agricultural and retail loans, completing know-your-customer requirements, accessing government schemes and resolving service-related issues," the official said. The official added that for banks, rural India remains a key source of low-cost deposits and an important market for priority-sector lending. "The time to reap the benefits of this long-term investment is now: with increasing prosperity in the rural areas given higher MSP (minimum selling price); direct transfer of resources to farmers and women; and a general set of initiatives focused on improving the rural sector like PM Gramin Awas Yojana, programmes on fisheries, dairy and milk, makhana, beekeeping and honey, and animal husbandry," said Charan Singh, chief executive of the Noida-based think-tank EGROW Foundation. Singh added that the PSBs must prepare a consolidated plan for rural areas to mobilize resources and extend credit....