Government Considers Hybrid ATMs to Boost Availability of Small Notes Amid UPI Surge
The government is exploring multiple measures to increase the circulation of small-denomination currency notes, even as UPI continues to drive the rise of digital payments across India, the world’s fourth-largest economy.
Among the proposals are new ATMs capable of dispensing ₹10, ₹20, and ₹50 notes, rather than the standard ₹100 and ₹500 notes. Another option under consideration is the deployment of Hybrid ATMs, which would allow users to exchange larger notes for smaller denominations, Mint reported on 27 January 2026, citing sources familiar with the matter.
“A prototype of low-denomination currency dispensing machines is currently being tested under a pilot project in Mumbai,” said a source on condition of anonymity. “Once approved, the system is expected to be scaled nationally, with Hybrid ATMs installed at high-footfall public locations such as transport hubs, markets, hospitals, and government offices.”
The Reserve Bank of India may also be urged to increase the printing of small-denomination notes to support the initiative.
Why Small Notes Matter
The move comes amid public frustration over the shortage of small notes for everyday transactions. Shopkeepers frequently struggle to provide change for ₹500 notes, which dominate both volume and value in circulation.
The initiative is expected to particularly benefit the informal economy and semi-urban areas, where cash is still widely used and UPI infrastructure can be limited. “In rural settings, especially interior parts, traders will have small-volume, low-value transactions per day,” said Devendra Pant, chief economist at India Ratings & Research. “It is the government’s responsibility and priority to improve ease of living.”
UPI and Limitations
Experts note that Hybrid ATMs alone cannot solve the problem without adequate supply of small notes. “Printing, logistics, and recirculation of smaller notes will need to be scaled up in parallel,” a bank executive told Mint.
There are also concerns about cost-effectiveness and alignment with the government’s push for digitisation. “This initiative should ideally be deployed at select locations only, as a large-scale rollout could prove uneconomical for banks,” said Vivek Iyer, partner and financial services risk leader at Grant Thornton. “The right approach is to apply these models where digital infrastructure is still evolving, balancing currency availability with the maturity of digital payments.”
