The Reserve Bank of India and the finance ministry have asked banks to ensure adequate cash availability at ATMs from October 15, as a precautionary measure ahead of new charges on select UPI transactions taking effect, according to people aware of the matter.
The instruction comes as authorities anticipate a temporary rise in cash usage through ATMs as people and merchants adjust to the new Merchant Discount Rate regime. A 0.4 per cent MDR will apply to person-to-merchant UPI transactions above Rs 2,000, capped at Rs 300 for transactions of Rs 75,000 and above. Person-to-person transactions and P2M transactions up to Rs 2,000 will remain free, with about 96 per cent of P2M UPI transaction volume falling below the Rs 2,000 threshold and therefore staying outside the new charge regime.
The potential shift comes at a time when banks’ ATM networks have been contracting even as digital payments have expanded rapidly. RBI data show the total number of ATMs, including those run by white-label operators, fell to 251,057 at the end of March 2025 from 253,417 a year earlier, driven mainly by the closure of off-site machines even as on-site ATMs increased. Public and private sector banks both reduced their ATM networks over the period, while white-label ATM operators expanded theirs.
ATM cash withdrawal volumes have also been declining, falling from about 68,975 lakh transactions in FY23 to roughly 53,394 lakh transactions in FY26, with total withdrawal value dropping from around Rs 32.8 lakh crore to about Rs 28.5 lakh crore over the same period.
According to the report, the decision to charge for UPI transactions risks disincentivising digital payments and pushing users back toward cash in a price-sensitive market, with concerns that a broader shift could also raise cash-handling and accounting costs for merchants.
Despite the digital payments boom, currency in circulation has continued to rise, reaching Rs 42.86 lakh crore at the end of August 2026, up 12.5 per cent from a year earlier. UPI transactions themselves touched 2,451 crore in August, worth about Rs 29.82 lakh crore, according to NPCI data.
Industry observers cited in the report suggested that any increase in ATM usage is likely to be temporary rather than a reversal of the broader shift toward digital payments, since consumers have already grown accustomed to using digital modes for everyday transactions. The preparatory steps taken by the government, RBI and banking industry have also been described as sound public policy aimed at maintaining confidence in the currency and banking system amid possible early implementation hiccups.
(Source: Mint / LiveMint)
