Background

When we hear the word, ‘Debit Card’ few more words come to our mind like ATM, cash, swipe, ease, risk and so on. In India, the debit card was introduced by a foreign bank almost three decades back. India has been a cash-driven economy for a long time. This dependency on cash has been hurting banks a lot, as the high operational cost associated with it has been hurting their pockets. Hence, they have been pushing customers to move to technology platforms. Almost two decades back, an ATM card or debit card started having traction. All customers were not privileged enough to hold this facility initially, but with increasing acceptability, it became a facility for the masses. In the initial years of this alternate channel era, there were fewer ATMs and long queue outside these air-cooled chambers; seeing success in the acceptability of ATMs, RBI and the government kept on pushing banks for opening new ATMs.

The ATM story

The number of ATMs has grown from 75,645 (from the starting of FY 2011-12) to 2,22,475 (to the end of FY 2016-17). So, ATMs have almost trebled in a short span of six years. Most banks were in the race to have a larger network of ATMs which in turn was helping them to reduce unwanted footfall at branches. But now, it seems that the growth of ATMs will soon start settling down. The growth of ATMs has not only slowed down; in fact, banks have been shutting down some of their ATMs. Banks have been shutting down some of their ATMs as hits per machine were very few on such ATMs. Maintaining such assets was not a lucrative option for banks. Rather than opening new ATMs, banks are nowadays taking the help of business analytics to help relocate ATMs with lesser hits.

The debit card usage

If we look at the volume of transactions (number of transactions) on ATMs, it has been growing gradually; however, there are few exceptions like demonetisation in FY 2017-18 and Covid pandemic in FY 2019-20, wherein there has been negative growth. A similar pattern is also observed in the usage value of debit cards (value of transactions) at ATMs, figures are increasing, but the pace has slowed down.
So reducing or stagnant number of ATMs is nowhere affecting cash withdrawal volumes at ATMs. These volumes are still increasing, following are possible reasons:

1. Increased coverage of banking – The financial inclusion drive, which gathered pace since 2014, has brought in 81 percent of the population under banking coverage (as per Financial Inclusion Insights (FII)). The major contribution to this success comes from saving account with simplified know your customer (KYC) norms known as BSBDA (Basic Saving Bank Deposit Accounts). BSBD account has registered enormous growth from 7.30 crores to 57.40 crores in the last decade. The business correspondent channel has been a real front runner in financial inclusion drive. So now, there is a large number of people using the formal financial network, leading to a higher number of transactions in the system.
   
   
2. Launch of Rupay Card – In the past half-decade, the number of debit cards has grown from 55.35 crores to 80.00 crores, and one of the major contributors has been ‘Rupay Card’. This domestic debit card was launched in 2012 and is having around 29.60 crores cards issued till FY 2019-20. It not only covered accounts under PMJDY (Pradhan Mantri Jan Dhan Yojna) but also covered KCC (Kisan Credit Card) accounts, enabling withdrawal of sanctioned loans in the form of cash through ATM.

Looking at the increase in the transactions at ATMs, has demonetisation and digital India programme launched by the Government of India really impacted towards transforming the country into a digitally empowered society? We need to see further dimensions of this story.