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Growth and Development of ATM in India

Article  in  Asian Journal of Research in Banking and Finance · January 2018

DOI: 10.5958/2249-7323.2018.00007.X

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 Asian Journal
Asian Research Consortium of Research in
Banking
and
Asian Journal of Research in Banking and Finance
Vol. 8, No. 1, January 2018, pp. 64-71. Finance
ISSN 2249-7323 www.aijsh.com
A Journal Indexed in Indian Citation Index
DOI NUMBER: 10.5958/2249-7323.2018.00007.X
UGC APPROVED JOURNAL
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Growth and Development of ATM in India

Ram Raj G*

*Post Graduate Research Scholar,

Christ, Bengaluru, India.

Abstract

This paper examines the various types of Automated Teller Machines (ATMs) in India. This study
also examines the growth and usage of Automated Teller Machine in Indian banking sector. This
study declares that there is an immense growth in Indian ATM service and positively increasing a
number of public using Automated Teller Machine every day. There are nearly ten types of
Automated Teller Machines which is available for use in Indian banking sector in the current
scenario.

Keywords: Automated Teller Machines, ATM -Technology, Types of ATM, Growth of ATM,
Usage of ATM.

Introduction

In today’s business world, every individual wants to develop and expand their businesses. To
sustain their business in the existing modern and globalised world, people in business employ smart
work to achieve their common goal of fast growth and huge profits. The financial service sector is
one of the major fastest growing industries in the world economy. The development of the financial
sector in a country is critically necessary for the rapid growth of the economy. The growth of the
financial sector is dependent on the progress of various intermediary banking and non-banking
institutions existing in the country. Hence there is a prerequisite for banking sectors to divert their
objectives from their existing goal of consistent profits to growth-oriented, futureplans. This can be
achieved by the banking sector by adopting technology in the business which will result in
innovation. One such innovation in the banking sector is automated teller machine (ATM) which is
widely accepted by all banks. Even though technological developments like mobile banking and
internet banking have helped in completely reforming the banking sector, ATMs remain to be an
important factor in the sector.

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 Raj (2018). Asian Journal of Research in Banking and Finance,
Vol. 8, No.1, pp. 64-71.

The Indian financial system is the most massive growing sector in the country. The
country has adopted technological innovation on a regular basis to implement change in
itsbusiness.ATM plays an essential role in India especially when the country is trying to achieve the
status of completefinancial inclusion. The evolution and the development can be implemented
successfully only when the customer is supportive and satisfied. The customer satisfaction can be
achieved only when the bank premises gratify the expectation of the customer through their user-
friendly, solution seeking ideas which can be better achieved through technology rather than their
bank employees. This paper throws light on the recent development and growth in ATMs in the
Indian financial sector.

Automated Teller Machine

The machine is known by the name Automated Teller Machine (ATM) in some countries and
Automated Banking Machine(ABM) in other countries (Canada).It is also notorious bydifferent
names like acash machine, cash point, mini bank, cash dispenser machine, etc. The primary
function of an ATM is financial transactions, particularly withdrawal of money for the public from
their personal account without using any human resources like a clerk, cashier, etc. These devices
are user-friendly with comprehensible software which can be accessed by all.The ATM also has an
electronic display to guide procedures step by step to the ignorant customers. It operates on 24*7
basis to help the customer to withdraw money based on their requirement.

This machinecan also be used for various other functions like cash balance verification,
mini statement of account, transferring money from customer account to another account holder
without any manual interface, paying additional charges like loan and insurance premium, etc. The
ATM card looks like a plastic smart card with a magnetic strip and a micro chip and containsa
unique card number for individual customers. It also contains other details like date of expiry and
CVV (Card Verification Value) code, for security purposes. A personal identification number
(PIN)is provided to every customer for authentication. This ATM card can be utilized for all
financial transactions like shopping bill payment (a point on sale), cinema ticket booking, mobile
recharge and other several other purposes.

Review of Literature

(Moutinho & Meidan, 1989) states that technological development leads to the usage of a new
product like ATM.It helps in reducing the usage of the bank and interaction between the banker and
the customer.

(Davies, Moutinho & Curry, 1996) states that ATMs act as a mediator between the banker
and the customer. It also acts as a connecting device between persons and artificial intelligence.
(Jetley, 2004) The technological development in various sectors illustrates the need for new
innovative concepts like ATM in the banking sector as well. The advancement in ATMs in the
recent times is shown through the environment friendly approaches adopt by the banks such as
solar power ATM centres. Solar power ATM centres will become a necessity in the near future as
India is suffering from the lack of adequate supply of electricity inmost of its areas. Power is the
biggest barrier for the development of ATMs in India.

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 Raj (2018). Asian Journal of Research in Banking and Finance,
Vol. 8, No.1, pp. 64-71.

(Choodambigai, 2011)This study aims to find the usage of ATM among the customers.
The result is that most of the customers use ATM for withdrawal of their money and very few of
them use to verify the account details. This study only concentrates on public sector banks. The
paper also aims to study credit card and ATM services based on customers’ perception.

(Kumar, 2011) This study expresses the reason for increasing usage of ATM in India. The
ability to provide major facilities like bill payment, money transfer and other financial services
helps to customers to save their time. The trust prevalent over the ATMs is high that the customers
do not even count after withdrawing their cash from the machine.

(Tuli, Khatri & Yadav, 2012) This study aims to compare public sector and private sector
bank ATMs, usage and other facilities. Only two banks- SBI and ICICI were taken for the study.
The result reveals that the public-sector bank dispenses old currencies and private sector bank run
out of cash most of the times. Thus, both the banks have their limitations. The paper does not
consider the bank employee perspectives and concentrate only on the customers who are using the
ATM. (Premalatha & Sundaram, 2012) The primary concern of this paper is about customer
satisfaction while using ATM, and it has been found there is a significant effect on age factor and
safety, gender and tangibility. But there is nosignificant relation between occupation and
satisfaction level. So, it is concluded that the customers expect safety, assurance and convenience
while using ATM and suggests to the banker to provide safety and accurate information to the
ATM users to increase reliability. (Bishnoi, 2013) The paper shows the increase in the usage of
ATM customers but lacks to find out the reasons and factors for the same.

(Renuka & Paulraj, 2014) This study concentrates on customers satisfaction at the point of
withdrawal, 24 hours and on the deposit system. But there is lack of awareness among the
customers while using ATM. It is suggested to the bankers that ratifying customers’ comments,
doubts and suggestions will increase the reputation of the bank among the customers.

(Sisat & Barbuddhe, 2014) This paper explains the various threats to ATM and Cash
Deposit machine. There are three types of risks involved while using the ATM, which are currency
fraud, logical attacks and physical damages. This paper explains the security system of ATM and
CDM.

Objective of the Study

 To depict the recent developments of ATM in India.

 To analyse the growth of ATM usage onsite and offsite in the Indian Banking Industry.

Research Methodology

This study is wholly based on secondary data. All the data were sourced from Reserve Bank of
India database. The time period of the ATM statistical report taken ranges from 2011 to 2017 and
only the report for March month was taken for the study. Other sources include articles from
various recognized journals, periodical articles, monthly magazines, and web. This paper employed
percentage analysis to find out the growth of ATM sectors in India.

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 Raj (2018). Asian Journal of Research in Banking and Finance,
Vol. 8, No.1, pp. 64-71.

Findings and Discussion

I - Recent Development of ATM in India

The growth of Indian economic systemin the past decade is found to grow at a rapid rate. Banking
industries in the financial sector are introducing a new concepton a regular basis to attract the
customers. The first ATM in India was presented by HSBC bank in 1987 at Mumbai branch for
withdrawal. The ATM was introduced with an objective to serve the customers during emergency
situations where cash deposits and withdrawals after regular banking hoursare required.The next
development in the ATM field is the introduction of an enquiry system to know the account balance
and statement so that the customers do not waste time waiting inside the bank premises. Many
significant changes like account transfer from one-person account to another account holders,
requisition claims like chequebook need, message alert etc.were noted after 2000. After 2010,
technological developments increased in ATM non-bankingservices. Such services include bill
payments, ticket bookings, mobile recharges, etc. Even though many developments have been
introduced in the sector, much more should be brought in to increase the quality of ATM services
in India. Few such changes are as follows:

1. White Label ATM

White Label ATMs canbe set up and operated by private, non-banking entities. As per RBI
guidelines, the bank which operatesATMs must have minimum net worth amount of 1 Crore. This
type of ATM operatoris permitted to use all kind of bank ATM cards, and are also allowed to
display their advertisement on the ATM counter. The operator must have a sponsor bank who will
provide money for their ATMs. As per RBI rules, the company is not permitted to use any logo or
name of the sponsor bank in the ATM centre. They can also provide a lot of value-added services
like bill payment, recharge, etc. with a maximum withdrawn limit Rs. 10,000. These ATMs
function 24/7. As per RBI guidelines, minimum two ATM centres are mandatory in 3 to 6 tiers and
if the bank desires, one ATM can be installed in the 1 & 2 tier cities. Following table shows the
details of the tier cities.

Table 1 Details of Population Categories

CATEGORIES TYPE TIER POPULATION

Metropolitan 1 10 Lakhs and above
Urban 1 1 Lakh and above
Semi-Urban 2 50,000 to 99,999
Semi-Urban 3 20,000 to 49,999
Semi-Urban 4 10,000 to 19,999
Rural 5 5,000 to 9,999
Rural 6 Less than 5,000

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 Raj (2018). Asian Journal of Research in Banking and Finance,
Vol. 8, No.1, pp. 64-71.

2. Brown Label ATM

Brown label ATMs can be taken onlease under the ownership of the service provider. They are
responsible for seeking a place for ATM centre and negotiating with the landlord.They must also
arrange for the electrical power supply, network system, interior decoration and ATM centre
maintenance worker. They can use the logo and name of the sponsor bank who maintains the cash
management and connectivity. This ATM follows the outsourcing concept where all the
activitiesare done by the third person. The service providers collect their charges form the bank.
The main advantage of this ATM is that the bankers need not worry about external factors and huge
investment in the ATM centre.

3. Online ATM

Online ATM relates to a bankdatabase where all the details like amount withdrawal limit, balances,
etc. are monitored by the bank.

4. Offline ATM

This offline ATM are not connected with the bank database, but the bank fixes this type of
transaction predefined withdrawal limit, we can withdrawal the money more than our balance
amount later we must pay the penalty for over withdrawal to bank

5. Onsite ATM

The onsite ATM are which is in branch premises itself or very close to branch

6. Offsite ATM

The offsite ATM is located far away from the branch premises usually in public places like
shopping complex, bus stand, airport and other majorplaces.

7. Mobile ATM

Mobile ATM refers to the ATM which can be easily moved from one place to another place for the
benefit of customers during festival times, religious functions, etc. They are highly mobile and
operate only during the required days.

8. Green Label ATM

This type of ATM can be used only for agricultural transactions.

9. Pink Label ATM

Pink Label ATM can be used by women for their transactions.

10. Other ATMs

The orange and Yellow labelcan be used for share trading and other e-commerce purposes.

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 Raj (2018). Asian Journal of Research in Banking and Finance,
Vol. 8, No.1, pp. 64-71.

II - Growth of ATM in India

The RBI database regarding ATM installation for the past eight years for the month of March is
given below in Table 2

Table 2 Number of ATM

YEAR ON-SITE OFF-SITE

2011 41,268 34,377
2012 47,545 48,141
2013 55,760 58,254
2014 83,379 76,676
2015 89,061 92,337
2016 1,01,950 97,149
2017 1,09,809 98,545
Source: (RBI DATABASE)

The above table gives details about the number of ATMs available in India. As per the table during
2011 (March) only 41,268 onsite ATM and 34,377 offsite ATM were present. But according to the
latest report of March 2017, there are nearly 1.1 lakhs onsite ATM and 1 lakh offsite ATM in India
depicting the high increase in the number of ATMs within a short span of 6 years. The graph for the
above data is as follows:

Graph 1

Number of ATM
120,000

100,000

80,000

60,000

40,000

20,000

0
2011 2012 2013 2014 2015 2016 2017
ON-SITE 41,268 47,545 55,760 83,379 89,061 101,950 109,809
OFF-SITE 34,377 48,141 58,254 76,676 92,337 97,149 98,545

Source: (RBI DATABASE)

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 Raj (2018). Asian Journal of Research in Banking and Finance,
Vol. 8, No.1, pp. 64-71.

It is analysed from the graph that on-site ATM is more than the offsite ATM every year.But in the
year 2013,theoffsite ATM is higher than the onsite ATMs which means that the banks had installed
ATMs in public places other than the bank premises for the benefit and convenience of the
customer.

III - Usage of ATM in India

The following details were extracted from the RBI database for thepasteight years. The ATM card
usage details taken are depicting in the table below:

Table 3 Number of Transaction in India

YEAR ATM POS

2011 39,95,53,342 2,24,61,539
2012 47,10,31,623 3,06,68,922
2013 48,20,04,645 4,53,76,619
2014 57,14,97,661 5,69,81,333
2015 62,42,05,135 7,61,05,726
2016 73,17,22,405 11,28,68,336
2017 71,01,08,656 27,11,72,292
Source: (RBI DATABASE)

The above table 3 expresses the number of ATM transactions in India. ATM depicts the cash
withdrawal directly from the ATM centre while POS depicts the swiping of the card at the place of
sale. POS helps the customers to carry less amount and with high safety. There is a considerable
increase in POS transactions in 2017 as compared to 2011. The usage of POS transactions has
increased 15 times while ATM transactions how only two times increase. The following graph 2
explains the number of transactions in India.

Graph 2

TRANSACTION
800,000,000
700,000,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
2011 2012 2013 2014 2015 2016 2017
ATM 399,553,3 471,031,6 482,004,6 571,497,6 624,205,1 731,722,4 710,108,6
POS 22,461,53 30,668,92 45,376,61 56,981,33 76,105,72 112,868,3 271,172,2

Source: (RBI DATABASE)

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 Raj (2018). Asian Journal of Research in Banking and Finance,
Vol. 8, No.1, pp. 64-71.

The graph 2 expresses the number of ATM card transactions in ATM centres and point on sale
machines.During the year 2016,the number of ATM centre usages were very high duetothe effect
of demonetization. The point on sale(POS)had increased at a rapid rate during the current year
2017. Every customer who has adopted the digital India system prefers cashless transactions.

Conclusion

This study is conducted using descriptive analysis with a focus on the types, rate and growth of
ATM usage among the bank customers in India. The results obtained show that there is a high
growth in the usage of Indian ATMs, especially after the demonetization scheme. It was also found
that the awareness level about cashless transactions among the public is significantly growing high
in the past few years. Adequate measures need to be taken by the Government to abolish the level
of ignorance existing among the users, which will help in increasing the awareness and interest to
accept and adopt technological developments in Indian banking sector among the public. It is the
joint responsibility of the Government and public to drift the country in the trail of cashless
economy.

Reference

Bishnoi, S. (2013). An Empirical Study of Customers Perception regarding Automated Teller

Machine in Delhi and NCR. Integral Review, 47-60.

Choodambigai, S. (2011). Customer Satisfaction of Credit Cards and ATm services of SBI in
Coimbatore. International Journal of Exclusive Management Research, 1-11.

Davies, F., Moutinho, L., & Curry, B. (1996). ATM User Attitudes: A Neural Network Analysis.
Marketing Intelligence & Planning, 26-32.

Jetley, N. (2004, April 0). Solar ATMs changing the face of banking in India. India: CNBC.

Kumar, S. (2011, March 6). India Riding the ATM wave. Hindustan Times.

Moutinho, L., & Meidan, A. (1989). Bank Customers' Perceptions, innovation and new technology.
International Journal of Bank Marketing, 22-27.

Premalatha, J. R., & Sundaram, N. (2012). Analysis of Customer Satisfaction with reference to
ATM services in Vellore District.IJMER.

Renuka, R., & Paulraj, A. (2014). Customers' Satisfaction towards Automated Teller Machine.
Indian Journal of Applied Research, 333-336.

Sisat, S., & Barbuddhe, V. (2014). Secured Automatic Teller Machine and Cash Deposit Machine.
International Journal of Advance Research In Computer Science and Management Studies,
118-121

Tuli, R., Khatri, A., & Yadav, A. (2012). A Comparative Study of Customer attitudes towards
ATM of SBI and ICICI Banks. International Journal of Marketing and Technology,
463-470.
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