ATM cash retraction new rules: The Reserve Bank of India has now partly reversed its January 2012 directive that had mandated disabling of cash retraction in ATMs. The original decision was taken to prevent fraudulent activities at ATMs.
ATMs are equipped with a mechanism that automatically retrieves unattended currency notes if customers fail to collect them within a specified time.
Earlier, when cash was retracted, the system would record it accordingly. However, this feature was misused by individuals who would collect partial amounts whilst allowing the system to log a complete retraction. The discontinuation of this feature successfully prevented such incidents.
New ATM fraud
- Recently, a new type of fraud has surfaced where criminals install counterfeit covers on ATM dispensing slots to trap cash. After customers leave the ATM assuming a transaction failure, these individuals collect the trapped money.
- The reintroduction of cash retraction functionality provides customers additional protection against such deceptive practices.
The National Payments Corporation of India has in a letter communicated to all National Financial Switch members that industry stakeholders, including banks and ATM manufacturers, provided their suggestions for addressing the fake shutter overlay issue, which were subsequently forwarded to RBI.
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Banking officials have indicated that the retraction feature will be selectively implemented only in ATMs identified as vulnerable to fraudulent activities.
Meanwhile, banks are reducing the number of ATMs and cash recycler machines, despite record-high cash circulation levels. This shift reflects the growing prominence of digital payments and the widespread adoption of UPI for everyday transactions.
According to Reserve Bank of India data, the country’s ATM network decreased to 215,000 in September 2024, compared to 219,000 in the previous year.
The most significant reduction occurred in off-site ATMs, with numbers declining to 87,638 in September 2024 from their highest point of 97,072 in September 2022.
This reduction in ATMs coincides with cash circulation reaching ₹34.70 lakh crore, doubling since demonetisation. Cash transactions still dominated, representing 89% of all transactions in FY22.
The ATM business has become less profitable due to RBI-imposed restrictions on free transactions, requirements for ATM interoperability, and minimal growth in interchange fees.
