Indian banks are significantly reducing their Automated Teller Machines (ATMs) and cash recyclers as part of a broader shift towards digital banking and the increasing popularity of Unified Payments Interface (UPI). According to data from the Reserve Bank of India (RBI), the number of ATMs in the country has dropped from 219,000 in September 2023 to 215,000 in September 2024. The decline in off-site ATMs has been even more significant, with the number falling from 97,072 in September 2022 to 87,638 by September 2024.

Digital Transformation and the Role of UPI

This reduction in ATM numbers is largely attributed to the rapid adoption of digital payments and the shift to digital banking. In particular, the Unified Payments Interface (UPI) has become a dominant force in the Indian payment landscape. UPI’s seamless peer-to-peer and peer-to-merchant payment capabilities have significantly reduced the need for cash transactions, contributing to the shrinking ATM network.

Focus on Underserved Regions

Despite this trend, industry leaders, including Mr. Ravi B Goyal, Chairman of AGS Transact Technologies, suggest that the reduction in ATMs is part of a larger effort by the banking sector to focus on digital transformation and expand services to underserved regions. As public sector banks merge and streamline their networks, there has been a greater emphasis on integrating both physical and digital infrastructure to better serve customers.

Cash’s Continued Role in India’s Economy

While digital payments are on the rise, cash still remains a critical part of the Indian economy. According to RBI data, cash transactions accounted for 89% of all transactions in FY22, and cash contributes about 12% to India’s Gross Domestic Product (GDP). However, ATM availability remains limited at just 15 ATMs per 100,000 people, a figure that has raised concerns over accessibility to cash in certain regions.

RBI Regulations and Their Impact

Several RBI regulations, including those on free ATM usage, interoperability, and interchange fees, have made it challenging for banks to invest in expanding the ATM network. With the costs associated with operating and maintaining ATMs, especially in less populated areas, banks are now exploring alternative models to balance digital and physical banking services.

Banks Explore the Two ATM Model

In response to this, banks are likely to adopt a two-ATM per branch model. This would mean that each branch would have one on-site ATM and one off-site ATM, strategically placed to ensure customers can still access cash while promoting the shift to digital banking. This approach aims to meet evolving customer needs while optimizing the ATM network.

ATMs: A Historical Milestone in Indian Banking

The first ATM in India was installed by the Hong Kong and Shanghai Banking Corporation (HSBC) in Mumbai in 1987, revolutionizing banking accessibility and the way people interacted with their finances. Over the years, ATMs have become a key milestone in banking accessibility, and they continue to serve as a vital tool for financial inclusion.

However, as digital payments become the norm, the role of ATMs may continue to evolve, and cashless transactions are expected to play an even larger role in India’s economic future.

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