Government Plans New ATMs for Small Notes and Coins to Ease Cash Crunch
In a significant move to tackle the persistent shortage of small-denomination currency notes that has plagued everyday cash transactions across India, the government is preparing to roll out a new generation of currency dispensing machines. These innovative ATMs will be capable of issuing ₹10, ₹20, and ₹50 banknotes at the press of a button, aiming to make lower-value currency more accessible to the public.
Multi-Pronged Approach to Address Currency Shortage
The Centre is exploring multiple strategies to ensure wider availability of small-denomination currency notes, nearly a decade after demonetization. According to officials familiar with government discussions, the comprehensive proposal includes:
- A new type of currency-dispensing machine specifically designed for ₹10, ₹20, and ₹50 notes
- A 'hybrid ATM' that combines conventional ATM functionality with coin vending capabilities
- Increased pressure on the Reserve Bank of India (RBI) to print more small denomination currency notes
A prototype of these low-denomination currency dispensing machines is currently undergoing testing in Mumbai as part of a pilot project, revealed one official who spoke on condition of anonymity. Once approved, the system is expected to be scaled up nationally, with installations planned at high-footfall public locations including transport hubs, markets, hospitals, and government offices.
Hybrid ATM Technology and Testing
The proposed hybrid ATM represents a technological innovation that would allow users to exchange higher denomination notes for smaller banknotes and coins in a single transaction. This machine essentially merges the functionality of a conventional ATM with that of a coin vending machine, creating a comprehensive currency exchange solution.
The Reserve Bank of India has already tested a hybrid ATM model at a Bank of Baroda branch in Mumbai, according to a second official who also requested anonymity. The government is expected to make decisions about wider rollout by banks in the coming weeks after reviewing the Mumbai pilot results and incorporating feedback from the central bank.
Addressing Public Frustration and Economic Needs
This initiative comes amid growing public frustration over the lack of small notes for routine payments. The shortage has created friction with merchants who often struggle to provide change for ₹500 notes, leading to transaction delays or forced rounding-off of prices.
The move is particularly expected to benefit large sections of the population that continue to rely heavily on cash, especially in urban informal sectors and semi-urban areas where digital payment acceptance remains uneven. "Availability of small denomination currency is critical for the smooth functioning of the cash economy, particularly for daily wage earners, small traders and commuters," emphasized the second official. "The idea is to make lower-value notes and coins as accessible as ₹500 notes are today."
Current Currency Distribution Challenges
RBI data reveals a significant imbalance in currency distribution. ₹500 notes account for 41.2% by volume of currency in circulation and a dominant 86% of their total value. In comparison, smaller denomination notes—₹2, ₹5, ₹10, ₹20 and ₹50—together comprise about 38% of total currency by volume, but only about 3.1% by value. The balance is accounted for by ₹100 and ₹200 notes.
Devendra Pant, chief economist at India Ratings and Research, highlighted that having more small notes in circulation will facilitate daily transactions, especially in rural areas where feature phones with limited digital transaction support remain widely used. "Also, in rural settings, especially in interior parts, traders will have small volume and value of transactions per day. It is the government’s responsibility and priority to improve ease of living," Pant stated.
Early Warnings and Expert Perspectives
The issue of acute shortage of small denomination notes across large parts of the country, particularly in semi-urban and rural areas, was earlier flagged by RBI employees' unions. In December 2025, the All India Reserve Bank Employees Association (Airbea) urged the RBI in a letter to ensure adequate supply of small denomination notes, warning that while higher value notes were easily available, lower denominations were "almost unavailable" causing "enormous problems in public life."
However, some experts caution that machines alone cannot solve the problem. "The machines alone cannot solve the problem unless backed by adequate supply. Printing, logistics and recirculation of smaller notes will have to be scaled up in parallel," said a banking sector executive on condition of anonymity.
Industry experts also emphasize that the rollout must be carefully calibrated. Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat, noted: "Addressing the challenge of limited small denomination currency is the right approach to take as a regulator—the question is not whether the initiative is right, but at what scale it should be implemented." He suggested that with the government's strong digitization agenda, this initiative should ideally be deployed at select locations only, as a large-scale rollout could prove uneconomical for banks.
Broader Monetary Context
The value of money in circulation has more than doubled since the days of demonetization. As of 4 November 2016, just days before demonetization, currency in circulation stood at ₹17.97 trillion, compared to ₹39.27 trillion as of 9 January 2026, according to RBI data. Of the ₹17.97 trillion in 2016, ₹500 and ₹1,000 notes accounted for ₹15.41 trillion or 86% of their total value and about 25% by volume, while smaller denominations of ₹100, 50, 20 and 10 banknotes accounted for over 74% of the volume at that time.
The government's new initiative represents a targeted approach to rebalancing currency availability while acknowledging the continued importance of cash transactions in significant segments of the Indian economy.
