India's war on cash: ATM network expansion has seen sharp drop since 2014

In 2014-17, growth rate in ATM additions declined 91 percentage points, card transactions rose 245%

As the world marks the 50th year of the first Automated Teller Machine (ATM) rolled out by Barclays Bank at Enfield in London, India seems to be in the midst of a full-blown war against cash. Five phenomena capture the Modi administration’s attempts to restrict the use of cash and steer India towards a less cash economy

One indicates that the government is squeezing easy access to cash through ATMs which had grown exponentially during the erstwhile United Progressive Alliance (UPA) administration. Reserve Bank of India (RBI) data suggest that in the three years from the Modi administration taking over in May 2014 to April 2017, the increase in the number of on-site and off-site ATMs has been 26 per cent when compared to the previous three-year period. This is the lowest growth rate for ATM additions in decades. During the last three years of the UPA government -- from April 2011 to April 2014 -- the number of ATMs had increased 117 per cent over the preceding three-year period. So, the difference between the growth rates in the successive three-year periods has been a whopping 91 percentage points. 

While most public and scheduled commercial banks had shown double-digit growth in ATM additions across the country during the UPA regime, banks have been less eager to expand their ATM networks during the Modi administration, which is working to restrict the use of cash to make financial transactions more transparent.

While the number of people with debit cards has increased exponentially during the period, the number of ATMs hasn’t grown proportionally. This is where the second phenomena of a rise in the number of debit card machines (called point of sale terminals) further throws light on the kind of less cash economy unravelling under the Modi administration. During the Modi regime, the number of debit card machines have grown by 143%. In the comparable period during the UPA regime, the growth in these machines was just about 79%.

It’s not just that the number of ATMs are growing slower and card machines growing faster under the present government. While people’s access to ATMs isn’t as easy as before and with the proliferation of card machines, there has been a commensurate rise in the number of debit card transactions at such machines. While debit card swipes at machines grew 136% during the UPA regime, they have grown three times as much during the NDA administration. In effect, the number of times people swiped their debit cards for transacting rose 245% more during the present government than under the UPA government.
 

More transactions on more debit card machines points to another peculiar phenomenon underway in India. The value of debit card transactions has grown close to 332% under the present government. During the UPA regime, the value of transactions had just about doubled during the comparable period.

This leads to the final phenomena. The number of ATM transactions seems to be growing at almost half the pace under the present government than it did during the previous one. While the amount of money transacted at ATMs grew almost 57% during the UPA government, it grew at just about 22% under the Modi administration. While millions of Indians still continue to rely on ATMs for cash, these phenomena signal that with the present government’s policy imperative, the 50-year-old ATM may well be losing steam in the world’s fastest growing and cash loving economy.