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Improving ATM Access Can Ensure Financial Inclusion Amongst the Underserved: The Dialogue

Expert Highlights the Need for at Least Half a Million to a Million ATMs in the Country

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As India advances technologically and digitally, financial inclusion will ensure economic growth and poverty reduction. As millions in rural areas struggle to access banking services, ATMs are vital for financial inclusion, especially in distributing subsidies.

Bridging the ATM Gap: A Critical Step Towards Financial Inclusion

In a bid to foster financial inclusion and bridge the gap between urban and rural areas, The Dialogue, a leading tech policy think-tank, organized a webinar on September 22, 2023. The event aimed to shed light on India’s financial inclusion efforts, with a specific focus on the crucial role played by ATMs in expanding access to banking services.

The Decline in ATM Deployment Rates: A Cause for Concern

Dr. Arpita Mukherjee, a Professor at the Indian Council for Research on International Economic Relations (ICRIER), highlighted the alarming decline in annual ATM deployment rates. While 2021-22 witnessed a 6% growth in ATM installations, the latest data from the Reserve Bank of India (RBI) reveals a meager 2% growth in 2022-23.

Dr. Mukherjee stressed the importance of ensuring the commercial viability of setting up ATMs in underserved areas. She proposed adjusting the interchange fee between ATM providers and banks to make this endeavor more economically viable. Additionally, Dr. Mukherjee emphasized the need to tailor financial inclusion efforts toward formalizing access to financial services, advocating the simultaneous development of digital and traditional payment modes.

A Dire Need for More ATMs in Rural India

Sudhakar Kaza, retired Managing Director of Bharatiya Reserve Bank Note Mudran and former Principal Chief General Manager of the Reserve Bank of India, pointed out that India currently boasts approximately 2.5 to 2.6 lakh ATMs, a number woefully inadequate for the nation’s size and population. To truly synergize digital and traditional payment transactions, Kaza stressed the necessity of having at least one ATM per village.

He urged the RBI to invite more companies to become White Label ATM Operators to expedite ATM expansion efforts. Kaza identified five key areas for immediate focus: subsidizing ATM infrastructure, insurance of cash in transit (borne by banks or the government), ensuring customer protection and swift grievance redressal, facilitating cash supply to ATMs and Business Correspondents (BCs) via the nearest bank branch, and ensuring the availability of currency notes in lower denominations in underserved areas.

Complementary Services: Digital and Cash Payments

Kazim Rizvi, Founding Director of The Dialogue, stressed the symbiotic relationship between digital payments and cash-based payments. He highlighted that in rural and remote areas, which heavily rely on cash, the proliferation of cash-in and cash-out points is of paramount importance. Rizvi advocated for holistic and inclusive financial inclusion efforts that cater to diverse needs.

Urgent Reforms Needed in ATM Interchange Fees

K. Srinivas, Managing Director and CEO of India 1 Payments, drew attention to the significant gap between interchange fees and the cost per transaction. He emphasized the need for a one-time correction to bridge this gap. Srinivas also called for dynamic adaptation of interchange fees in line with the continuously rising operational costs of ATMs. These reforms, according to Srinivas, would reignite the interest of ATM operators currently grappling with substantial losses and ensure that interchange fees enable ATM deployers to earn a reasonable return on their investments.

ATMs: The Bedrock of Financial Inclusion

Despite the digital revolution’s role in boosting economic growth, ATMs remain essential for rural Indian citizens. They complement digitization efforts and prevent financial exclusion in remote communities. The insights shared during The Dialogue’s webinar underscore the urgency of addressing the decline in ATM deployment rates and the need for comprehensive reforms to ensure financial inclusion reaches every corner of India. With experts and policymakers in agreement, the nation must act swiftly to ensure that ATMs play a pivotal role in bringing economic prosperity to the underserved populations in both urban and rural areas.

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