Financial inclusion has been a multifaceted problem for the whole world. The whole world is facing difficulties bringing in people in the formal financial system. Even the developed countries cannot claim to have brought its citizens into the formal financial system. And when it comes to a developing country like India, financial inclusion is a herculean task. However, India’s performance in bringing her citizens into the formal financial system in the last decade is really remarkable.
A number of initiatives and schemes such as Jan Dhan Yojana to Pension Yojana to Mudra Yojana etc. have been started by the central government in India over time to bring in people in the formal financial network but still a long distance is yet to be covered. There are crores of individuals who are still not part of the formal financial system or cannot access the formal financial system. Though, the government has been trying to use every possible initiative and technological advancement to advance financial inclusion in India. ATMs have also been used to increase financial inclusion in India especially in rural India.
White-label ATMs were expected to become a tool of financial inclusion and address India's low ATM penetration rates in rural areas. However, it couldn’t happen. Running ATMs is a costly affair for banking companies and when it comes to rural areas, running ATMs in rural areas itself is challenging because of the very high capital and operational costs.
Every technological advancement does offer some challenges as well as opportunities to the users. Financial institutions coupled with technology of ATMs are innovatively trying to provide a solution by bringing Micro ATMs in the Indian financial system mainly focused on rural India to increase access to ATMs.
Micro ATMs are portable machines operated by banking correspondents at a fraction of the cost of White Label ATMs are helping fill the gap. Their count doubled in one year between September 2021 and September 2022, and increased by another 20% over the next 12 months by September 2023. Currently the number of Micro ATMs is about six times that of standard ATMs which are respectively 1.49 million and 0.26 million for micro ATMs and standard ATMs.
However, initiatives like Digital India and governmental push for digital transactions are having impact on the cash withdrawal from the micro ATMs also. Like standard ATMs, cash withdrawals from micro ATMs also dropped on a year-on-year basis in September 2023 by transactions and 2.4% by value.
The usage of micro ATMs is expected to pick up which is basically driven by new payment banks. Four of the top five deployers of micro ATMs are payment banks promoted by National Securities Depository Ltd (NSDL), Fino, India Post and Airtel. In the past year alone, NSDL, Fino and Airtel together added 479,000 micro ATMs about 85% of standard ATMs in place. So the usage of micro is expected to increase because of increased penetration.
As far as the drop in the value of case withdrawal from ATMs; both standard and micro, the value is not very high. But it still is important for the Indian financial system. It should be noted that even in the rural areas, the penetration of UPI and other forms of digital transactions has increased in the last few years and mostly since the Coronavirus pandemic. As a result the dependence on cash for transactions in the rural areas is also going down. However, the acceptance of digital mode of payment is still on lower side in the rural areas in comparison to the urban areas but it is expected to improve in the coming days with more awareness and marketing push by different banking companies as well as payment banks which are aggressively focusing on the rural areas for their growth with marketing getting very competitive in urban areas and almost saturated for ATMs.
Rajeev K Upadhyay
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