River bank erosion is the natural signature of the active fluvial dynamics, which occurs through oscillation. However, this physical phenomenon becomes more important to study when it influences the livelihood and economy of the bank settlers of the riparian villages along the channel. The direction and magnitude of bank erosion become more complex due to the unscientific involvement of anthropogenic activities along the bank line. Thus, the objective of the present paper is to find the impact of bank erosion on the change of land use/land cover (LULC), particularly in the lower reach of the Balasan River of the Darjeeling Terai region. Remote sensing data (IRS and Landsat) are used to mark the erosion-prone area along lower Balasan from 2000 to 2020. Normalized Difference Water Index (NDWI) is used to delineate the path of the Balasan River. Landsat images are used to analyze the status and changes in LULC along the channel with a 200-m buffer. Accuracy assessment of the LULC is done using overall accuracy and kappa coefficient. The findings show that fertile agricultural lands are eroded by the Balasan channel under this lower Balasan stretch. Unconsolidated coarse sediment, deposited at accretion sites, also reduces the scope of the traditional agriculture-based economy along the river. Unscientific sand and boulder mining damage the natural geometry of channel plan form regularly, which may also create uncertainty in channel oscillation and favor the tendency of change in land use along the Balasan. Conversion of LULC is found higher at those reaches along Balasan, which are under severe threat of channel shifting. A major transformation in land use has been observed in categories of agricultural land to settlement, sediment deposition to water (river), tea garden to settlement, and sediment deposition to agricultural land, which has been changing the local economy regularly. The outcome of this present research can be treated as a model study regarding the impact of river bank erosion on the riparian villages’ LULC in the foothills area, which affects the character of the local economy.