Indian banks are reducing their ATM networks, despite a record-high cash circulation in the economy. The shift is driven by the increasing adoption of digital payments, particularly Unified Payments Interface (UPI), and a strategic push toward digital transformation. According to RBI data, the number of ATMs decreased from 219,000 in September 2023 to 215,000 in September 2024, with a notable reduction in off-site ATMs.
Key Drivers: Digital Payments and Digital Transformation
The growing popularity of digital payments, such as UPI, has encouraged banks to focus on digital infrastructure over traditional ATMs. This trend aligns with India’s broader banking sector strategy, which aims to modernize operations while reducing costs associated with maintaining physical cash dispensers. Ravi B. Goyal, chairman of AGS Transact Technologies, noted that banks are optimizing networks by consolidating physical and digital infrastructures, particularly in public sector banks.
ATM Penetration Challenges in India
ATM penetration remains low in India, with only 15 ATMs per 100,000 people, highlighting a disparity between cash usage and ATM availability. Additionally, regulations on free ATM transactions, interchange fees, and interoperability requirements have deterred further ATM investments. Although cash still accounted for 89% of transactions in FY22, banks are rethinking ATM networks to balance accessibility with financial efficiency.
Industry Shift: Towards a Hybrid Model of Physical and Digital Access
Experts predict that India’s banking sector will adopt a hybrid model with two ATMs per branch (one on-site and one off-site) as part of a global trend. This approach allows banks to maintain essential cash services while expanding digital offerings, particularly in underserved regions. As banks continue to phase out underutilized ATMs, they aim to create a more efficient, digitally integrated customer experience.
Conclusion: Balancing Cash Needs and Digital Innovation
The reduction of ATMs in India signifies a critical juncture as the banking sector navigates the demands of digital payments and cash accessibility. With a focus on digital transformation and customer convenience, Indian banks are recalibrating their approach to ATM infrastructure, marking a shift toward a balanced, hybrid banking experience that supports both cash-dependent and digitally savvy customers.
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