India stares at acute shortage of ATMs

The country is facing an acute shortage of automated teller machines (ATMs), as there are only 17 ATMs per lakh people.

There is a need for at least 4 lakh ATMs in the next two years, from the present 2.22 lakh, according to a research note by Tata Communications Payment Solutions Ltd (TCPSL), which is the largest WLA (White Label ATM) operator.

At present, the country has a total of 2,21,492 ATMs including 15,626 white label ATMs. A White Label ATM is operated by a non-banking entity.

In a country where only 16% of rural population transacts online, the shortage of ATMs is a big concern as the majority of the country’s 134 crore population resides in the rural areas. Barely 5% of the rural areas have access to an ATM.

“There are over 6 lakh villages in India, but not more than 30,000 villages have ATMs. People from rural areas end up travelling at least 10 km to access any kind of banking services. At a time when we talk about Direct Benefit Transfer, how will these rural populations withdraw those subsidies without ATMs or bank services available,” asked K Srinivas, MD, and CEO of BTI Payments, the second largest White Label ATM player.

He stressed the need for more ATMs in rural and semi-urban areas. An analysis of RBI data reveals that India's ATM penetration stands at 15 per lakh population, less than the fourth of neighbouring China's 63. If we include 15,626 white label ATMs, the cash vending machines operated by non-bank entities in the country, stand at just 17 per lakh population.

Globally, the US has the highest penetration of ATMs with 173 cash vending machines per lakh people.

Sanjeev Patel, CEO of TCPSL said, “Cash continues to be in strong demand even post demonetisation a fact that is reaffirmed in the ATM transactions volumes that are seeing a growth trend in spite of the digital euphoria.”

The total cash in circulation, as of December 14, stood at Rs 20.24 lakh crore, up 2.15 times in less than two years since December 23, 2016, when cash in circulation depleted to Rs 9.4 lakh crore, owing to the withdrawal of high-value currency notes (Rs 500 and Rs 1,000 denomination).

Patel added that though the Indian government is striving hard to push Indian digital economy to $1 trillion in the next 5-7 years, the fact remains that a large number of people depend on cash.

Though many digital transactions including POS, m-wallets had increased exponentially immediately after demonetisation primarily triggered by less cash availability, however, their growth rates have reduced now and data show that they have not eaten into ATM transactions. Like in other economies namely US and China, instead of pegging Cash v/s Digital we should allow each payment platform to co-exist, for the end consumer to decide which is the most convenient way for him to access his own money, he said.

ATMs are operated by 51 companies which include scheduled commercial banks, payments banks, and small saving banks.

While the study by TCPSL calls for a massive uptick of the number of ATMs across the country, an analysis of RBI data suggests that the number of bank ATMs post-March 2017, has gone down by 2,331. In March 2017, the number of ATMs by various banks stood at 2.08 lakh as against 2.05 lakh at present.