Rural centres emerge as new frontier for banks' ATM expansion drive

According to industry experts, maintaining ATMs for banks has become an expensive task in urban cities as most ATMs remain idle with people using less cash amid rise in UPI transactions

With automated teller machine (ATM) usage declining due to rising digital payments and operating costs climbing in metro and urban centres, banks are shifting their focus to installing more ATMs in semi-urban and rural areas, where costs remain relatively lower, according to senior banking executives. 

“The focus is on rationalising ATM numbers and locations. Many ATMs aren’t profitable, and footfalls are low. So, we’re either closing them or relocating them to semi-urban and rural areas,” said a senior executive with a state-owned bank. 

Industry experts say maintaining ATMs has become increasingly expensive in urban areas, as most machines see little use with people relying more on digital payments, particularly Unified Payments Interface transactions. 

“It costs around ₹1 lakh per ATM per month to maintain one in an urban city like Mumbai. Of this, rent for a small 6×8 ft ATM space can reach ₹40,000. On top of that, regulations cap the number of free ATM withdrawals and limit interchange fees, which squeezes margins further,” said a senior private bank executive, highlighting the cost pressures in urban centres. 

According to Reserve Bank of India (RBI) data, the total number of ATMs fell to 211,000 in 2024-25 (FY25), down from 216,000 in 2022–23, when ATM numbers peaked. Over the same period, the number of bank branches rose sharply to 142,000 in FY25.

An RBI report revealed that only 15 ATMs are available for every 100,000 people, and nearly 80 per cent of these are located in urban centres — even though 67 per cent of India’s population lives in rural areas. 

However, bankers pointed out that installing more ATMs in rural areas could increase overall costs, as the cost per transaction would rise due to fewer daily transactions. Banks must also provide power back-ups and security against theft in these regions. “The cost will go up, but maintaining ATMs in cities isn’t profitable anymore — it’s better to shift to rural areas. It also supports the goal of financial inclusion, which the government and RBI are pushing,” said another banker at a state-owned bank. 

To rein in operational expenses, banks are increasingly deploying cash recycling machines that support both deposits and withdrawals. These machines reduce reliance on physical branches while keeping essential services accessible. 

Separately, micro ATMs — compact, portable devices that provide basic banking services — are also seeing a sharp uptick. RBI data shows their deployment surged 18 per cent, from 1.24 million in September 2022 to nearly 1.46 million in 2024. These devices are especially useful in remote areas. Banks are also working to make ATMs “smarter” by adding features like biometric authentication and fund transfers, turning them into mini-bank terminals. 

“Installing more micro ATMs and mobile ATMs in rural areas can help banks reduce operational expenses compared to traditional ATMs. Micro ATMs are low-cost handheld devices operated by local business correspondents, eliminating the need for physical infrastructure, electricity, security, and staffing, which drastically cuts both capital and maintenance costs,” a senior banking executive said. 

He added that these ATMs rely on mobile connectivity and offer basic services such as cash withdrawals and balance enquiries at a fraction of the cost. Similarly, mobile ATMs mounted on vehicles can serve multiple locations on a rotating basis, reducing the need for fixed-site ATMs and helping banks optimise cash logistics and infrastructure.