Do ATMs still make sense?

**Akshara** (0:04)
In today's episode, we'll break down one important story. We'll talk about whether the ATMs in India are dead. Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Wednesday, 3rd June. When was the last time you took cash out of an ATM? The existence of UPI has at least minimized, if not outright removed the use of ATMs for many people in Indian cities. But believe it or not, India is sitting on more physical cash today than it has at any point in its history.
According to the RBI's currency and circulation data, the total value of banknotes in circulation in India was 41 lakh crore. That's actually more than double the level just before demonetization in November 2016, when banknotes in circulation stood at approximately rupees 18 lakh crore.
The currency that denomination was supposed to remove has more than come back. Now, UPI didn't kill cash. It took over the small, fast daily transactions. The local tea or coffee shop, the auto, the kirana shop, and so on. But large parts of the country still run on cash for reasons that have little to do with UPI's technical capabilities.
In much of rural India, where the only bank branch is hours away, cash is just what works. Many of the people transacting in cash, like agricultural laborers, daily wage construction workers, and small traders in rural and semi-urban India, don't even have working bank accounts, or have lost trust in them.
A lot of transactions in real estate and the unorganized economy are settled in cash, precisely to stay outside the formal banking train. And then there's the question of what kind of cash this is.
Of the 41 lakh crore rupees in banknotes, roughly 35.2 lakh crore rupees is in 500 rupee notes alone. Now, the 500 rupee note isn't the one you use for everyday spending. It sits in wallets, drawers, and almirahs. In a 2023 research paper, the RBI concluded that digital payments are now substituting cash for everyday transactions, but the store of value motive for holding cash remains intact. Cash in India has grown not because people are transacting in it more, but because they're holding more of it. Now, the demand for physical cash is very much alive. What UPI has changed is how people get hold of it, and because of it, the economics of running ATMs. After all, several ATM operators, including one of the two largest companies that ran the country's ATM network, have collapsed in the last few years. But the chain of events isn't as straightforward as you'd think. And that's what we'll be getting into in this story. So let's start with the fundamentals of how ATM operators make money. Say you have an HDFC bank account. You walk up to an SBI ATM and withdraw rupees 10,000. Behind the scenes, HDFC bank, which is your bank, pays SBI a small fee for letting you use their machine. This fee is called the interchange fee. Now, the interchange fee is the source of margins for an offsite ATM, which is an ATM not attached to a bank branch. An ATM exists because somebody runs them and earns 19 rupees every time you use one. Sometimes, the owner is a bank itself, paying a third party to manage the machine on a per-transaction basis. Sometimes, the owner is a separate non-bank company called a white-label operator, like Indicash or Hitachi Money Spot, whose whole living comes from interchange fees. The model works as long as enough people use each machine repeatedly. But the fee has barely moved. It was 15 rupees from 2012, raised to 17 rupees in August 2021, and then to 19 rupees in May 2025
Two hikes in 13 years.
Since UPI took over small daily transactions, an ATM that used to do 200 transactions a day, now does a fraction of that. And at the same time, the costs of running an ATM machine from the rent on the ATM cubicle, to the diesel for the cash van that comes to refill the machine, have all gone up. Perhaps the biggest cost increase lies in wages. The new labor codes, which standardize minimum wages and benefits across India, are pushing up the cost of ground level workforce that runs this industry, like drivers, security guards, and cash custodians. The Currency Cycle Association, which is the industry body for cash operators, told Business Standard in May 2026 that the industry is now in a force majeure situation. That's a term for when a business can no longer operate as designed because of forces it can no longer control. So the first major domino that fell victim to a force majeure situation was EGS Transact Technologies. EGS was the second largest ATM managed services provider in India. At its August 2021 peak, it had installed, maintained, or managed around 72,000 ATMs and cash recyclers across the country. It went public in January 2022 at Rs.175 a share. But by mid-2025, the company found itself in freefall. In early 2025, nearly 38,000 ATM serviced by AGS went dark, including 14,000 SBI ATMs, India Post ATMs, and Yes Bank ATMs. On August 25, 2025, the National Company Law Tribunal in Mumbai admitted AGS to corporate insolvency, and by February 2026, admitted creditor claims against the company had reached Rs.13,171 crore. The stock was at Rs.5, down 97% from its IPO price. AGS was the most dramatic failure, but not the only one. White label operators have been hit just as hard. Since they only earn from interchange and run no other line of business, a Rs.19 fee that no longer covers cost is an existential problem rather than a margin question. Data Communications, for instance, divested its white label network Indicash to Finday India in March, 2026, exiting the business it had pioneered in 2013