With the UPI accelerating the shift towards digital transactions, policymakers are looking at fresh ways to boost the circulation of smaller-denomination notes across the economy.
Among the proposals being reportedly examined are new ATMs that would allow withdrawals of Rs 10, Rs 20 and Rs 50 notes, rather than limiting users to higher denominations such as Rs 100 and Rs 500.
According to a Mint report, hybrid ATMs that enable the conversion of large notes into smaller ones are also being mulled.
“A prototype of low-denomination currency dispensing machines is currently being tested under a pilot project in Mumbai,” one of the sources quoted by the Mint said.
Once the proposal receives clearance, officials expect the update to reflect in hybrid ATMs installed at busy public sites, such as transport interchanges, markets, hospitals and government buildings. Sources added that the Reserve Bank of India could also be asked to step up the printing of low-denomination notes.
The proposal is being advanced against the backdrop of growing public irritation over the difficulty of obtaining small change, as many shopkeepers struggle to offer change for Rs 500 notes, the largest denomination in circulation by volume and value.
Devendra Pant, chief economist at India Ratings & Research, told Mint, “Also, in rural settings, especially in interior parts, traders will have small volume and value of transactions per day.”
However, in regions with weak UPI coverage, hybrid cash machines are unlikely to deliver the intended results.
“The machines (Hybrid ATMs) alone cannot solve the problem unless backed by an adequate supply,” an unnamed bank executive told Mint. “Printing, logistics, and recirculation of smaller notes will have to be scaled up in parallel.”
There are concerns that the initiative clashes with the government's wider digital transformation goals.
“This initiative should ideally be deployed at select locations only, as a large-scale rollout could prove uneconomical for banks,” Vivek Iyer, partner and financial services risk leader at Grant Thornton, told Mint.
“The right approach will be to apply these models where digital infrastructure is still evolving, so that currency availability is balanced with the maturity of digital payments.”
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