A year after demonetisation, access to money in the country’s remotest parts still poses a great challenge. The latest RBI figures reveal that the number of ATMs in rural areas has shrunk by a little over 1,000 in the past year — between the quarter ending September 2016 and September 2017.

India’s rural areas were the worst hit during demonetisation, with the shortage of cash in ATMs more acute in these areas. Industry players indicate that the RBI’s remonetisation drive has not resolved the cash supply to ATMs in rural areas, forcing the shutdown of many ATMs.

Dismal numbers

The number of ATMs in rural areas has fallen from around 41,633 as of September 2016 to 40,489 in the quarter ending September 2017. While public sector banks operate only about 20 per cent of their ATMs in rural areas, the reach of private banks in the hinterland is far poorer, with just 8 per cent of their machines functioning in these areas.

SBI has a little over 10,000 ATMs in rural areas; the second-largest network belongs to PNB, which has a far lower number of 2,437. The count reduces significantly to less than 1,000 ATMs after the top 10 banks.

White-label ATMs

One of the initiatives that the RBI took a couple of years ago, was to grant licences to non-bank entities to set up white-label ATMs (WLAs), with the aim of expanding reach of ATMs in semi-urban and rural areas. Under the RBI’s guidelines, a minimum number of WLAs have to be installed in Tier-III to -VI centres. Hence, about 42 per cent of WLAs operate in rural areas.

However, since the total number of WLAs itself is significantly smaller than bank-operated ATMs, access to money still remains a challenge. As of September 2017, there were just 6,044 WLAs in rural areas. Moreover, of the 8 players in this market, two players — Tata Communications Payment Solutions or TCPSL (8,158) and BTI Payments (4, 544) — alone constitute nearly 90 per cent of total WLAs. Owing to regulatory constraints and the number of transactions failing to scale up in remote areas, WLA operators have found it difficult to generate revenues and hence expand further. Cash supply issues have made matters worse.

TCPSL has seen the number of ATMs in rural areas fall from 3,528 in September 2016 to 3,053 in September 2017.

“Freeing up the cap on the number of ATM transactions in rural areas can help, as these customers are more price-sensitive,” says Sanjeev Patel, CEO, TCPSL. He adds that increasing the interchange fee that a bank pays to the entity that maintains the ATM, at least in rural areas, will also incentivise players to deploy more ATMs.

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