Fewer ATMs, more UPI: India's banking sector shifts to digital payments

As digital payments and UPI gain popularity, Indian banks are cutting down on ATM expansion, especially in off-site locations, and focusing on digital infrastructure

Amid record-high cash circulation, banks in India are reportedly reducing the number of Automated Teller Machines and cash recyclers, according to a report by The Times of India. This is due to the growing adoption of digital payments, especially through UPI, alongside a strategic shift towards digital banking. 

According to data from the Reserve Bank of India (RBI), ATM numbers dropped from 219,000 in September 2023 to 215,000 in September 2024, with a significant decline in off-site ATMs — from 97,072 in September 2022 to 87,638 by September 2024.

 

The report quoted Ravi B Goyal, chairman of AGS Transact Technologies, as saying that recent ATM deployment trends show the banking sector’s emphasis on digital transformation, consolidation, and service expansion into underserved areas. He noted that public sector bank mergers have led to more streamlined networks that combine physical and digital infrastructure.

 

RBI’s influence on ATM investments

Despite the dominance of cash — accounting for 89 per cent of transactions in FY22 and 12 per cent of GDP — ATM availability remained limited to just 15 per 100,000 people. Factors like RBI’s regulations on free ATM usage, interoperability, and interchange fees have contributed to decreased investments in ATMs. 

Industry insiders indicate that Indian banks might adopt a model with two ATMs per branch — one on-site and one off-site — to balance digital and physical banking services in response to changing customer needs, the news report said.

ATMs: A brief history

Automated Teller Machines have revolutionised banking in India, with their introduction marking a milestone in financial accessibility. The first ATM was installed by the Hong Kong and Shanghai Banking Corporation (HSBC) in Mumbai on June 27, 1987. This allowed customers to withdraw cash without needing to visit a bank branch, transforming how people interacted with their finances.

 

The concept of ATMs originated from John Shepherd-Barron, who, inspired by chocolate vending machines, developed the first operational ATM in London in 1967. Following its global success, India noticed this technology two decades later, leading to rapid growth in the ATM network. By 1999, there were over 1,500 ATMs across the country, and the industry saw exponential growth after that.