India's micro ATMs vanish as compliance burden turns operators off

In India’s big cities, where automated telling machines (ATM) and bank branches dot most neighbourhoods, access to cash is largely taken for granted. In rural India, however, the story couldn’t be more different. Despite nearly two-thirds of India’s population residing in rural areas, according to World Bank data from 2023, only 17% of India’s ATMs are deployed in these areas, states data from the country’s central bank, the Reserve Bank of India (RBI).

In the absence of ATMs, micro-ATMs have emerged as a godsend for rural Indians. These handheld devices, which resemble point-of-sales (PoS) terminals, are operated by local entrepreneurs—officially referred to as business correspondents (BC)—employed by banks. Customers can receive money from or deposit it with these entrepreneurs, using bank cards or the Aadhar Enabled Payment System (AePS) to log these transactions on micro ATMs, which are connected to banking networks through mobile internet. Customers can even use these devices to access their bank statements, while BCs earn a small commission from each transaction for their troubles. 

Often, say executives in the banking sector, micro ATMs are deployed in local kirana stores, with the store owners doubling up as BCs in order to earn an extra income. 

Rudimentary as the system may seem, micro ATMs have been a critical tool in India’s quest to promote financial inclusion. Despite the rise in UPI transactions, micro ATMs are still relevant for crores of people who depend on cash for day-to-day transactions.

The majority of micro ATM users include beneficiaries of various government welfare schemes as well as migrant workers. The former alone accounts for over 100 crore Indians, according to data from the Ministry of Finance. “In cities like Chennai, these devices are mostly used by migrant labourers, who still get paid in cash,” Meshach Manohar, the former regional head of an ATM management company, tells The CapTable. While Manohar acknowledges a rise in UPI transactions, he says that people still prefer cash payments for big-ticket transactions owing to their lack of comfort with digital banking.