What is an ATM and its Work, Types, Uses, Benefits, Features and History

What is an ATM?

An Automated Teller Machine (ATM) is a self-service electronic machine that allows bank customers to perform basic banking activities without needing to visit a bank branch or interact with a teller. ATMs enable users to withdraw cash, check account balances, transfer funds between accounts, and sometimes even deposit cash or cheques. By using a plastic ATM card and a personal identification number (PIN), customers can access their bank accounts 24 hours a day, seven days a week, providing convenience and reducing the need to stand in long queues at bank branches.

What is the full form of ATM?

The full form of ATM is Automated Teller Machine. In India, this term is widely used by banks, financial institutions, and customers to refer to machines that dispense and, in many cases, accept cash, providing a convenient extension of branch banking services.

History of ATM

The concept of a self-service banking machine began in the 1960s. The first operational ATM was installed by Barclays Bank in London on June 27, 1967. Initially, these machines used special vouchers impregnated with radioactive material or special code cards for access. Over time, magnetic stripe cards replaced older technologies, and PIN-based security became standard. In India, the first ATM was installed in 1987 by HSBC in Mumbai.

Over the next decade, major Indian banks such as State Bank of India (SBI), ICICI Bank, and HDFC Bank began deploying ATMs across metro cities. During the 1990s and early 2000s, the number of ATMs in India grew rapidly, driven by customer demand for round-the-clock access to cash and other banking services. Today, thousands of ATMs across urban and rural regions form a critical part of India’s banking infrastructure.

Types of ATM in India

In India, ATMs can be broadly classified by functionality, location, and ownership. Below are the primary categories:

• Basic Units: Basic Unit ATMs provide fundamental services such as cash withdrawal and balance inquiry. They do not offer deposit features or advanced services like cash recycling. These machines are often used in small towns or rural areas where simple, essential withdrawal functionality is sufficient.
• Complex Units: Complex Unit ATMs offer additional services beyond basic functions. In addition to dispensing cash and balance checks, they may enable cash or cheque deposits, mini-statements, PIN change, fund transfers, and printing of account statements. Complex Units are usually installed at larger branches or high-traffic locations where customers require more than just cash withdrawals.
• On-Site ATMs: On-Site ATMs are located within the premises of a bank branch, such as inside the lobby or just outside the entrance. Since these machines are on bank property, they are typically managed and serviced directly by the bank. On-Site ATMs are often more secure and may offer a full range of services.
• Off-Site ATMs: Off-Site ATMs are installed outside bank branches often in shopping malls, petrol pumps, airports, railway stations, or standalone kiosks. These machines extend banking services to places where foot traffic is high and bank branches are not immediately available. Off-Site ATMs usually offer basic and some advanced services, depending on the bank’s deployment strategy.
• Cash Dispenser ATMs: Cash Dispenser ATMs are machines dedicated solely to dispensing cash. They do not accept deposits or cheques, and they generally do not offer advanced services such as mini-statements or PIN changes. These ATMs are common in remote locations or where space and management resources are limited.
• White-Label ATMs: White-Label ATMs (WLAs) are owned and operated by non-bank entities, approved by the Reserve Bank of India (RBI). A white-label operator installs and manages the ATM, but customers of multiple banks can withdraw cash using their bank debit cards. WLAs aim to improve financial inclusion by placing ATMs in underserved or rural areas where banks may not find it economically viable to operate their own machines.
• Green Label ATMs: Green Label ATMs refer to machines owned and operated by commercial banks. These ATMs carry the branding of the sponsoring bank (for example, SBI, ICICI Bank, or HDFC Bank). Customers of the sponsoring bank and, in most cases, customers of other banks (through interbank networks) can use these machines. Green Label ATMs are usually found both on-site and off-site, offering a range of services from basic cash withdrawal to deposits.
• Orange Label ATMs: Orange Label ATMs are generally operated by Regional Rural Banks (RRBs), cooperative banks, or small finance banks that cater to semi-urban and rural areas. The “Orange” label helps customers identify that the machine belongs to a cooperative or regional rural bank. These ATMs focus on improving banking penetration in regions that larger commercial banks may not cover extensively.
• Pink Label ATMs: Pink Label ATMs often refer to micro-ATMs or machines deployed by Business Correspondents under the Financial Inclusion initiative. These ATMs typically have limited functionality: they use handheld devices or biometric authentication (Aadhaar-enabled) to facilitate cash withdrawals and small-value transactions. Pink Label ATMs help provide basic banking services in extremely remote or unbanked locations.
• Yellow Label ATMs: Yellow Label ATMs are designed primarily for cash deposit and recycling. They allow customers to deposit cash (and sometimes cheques) directly into their accounts without an envelope. The machine verifies the denomination and authenticity of the notes, credits the account, and may even dispense change if required. Yellow Label ATMs improve efficiency for customers who need to deposit money outside banking hours.
• Brown Label ATMs: Brown Label ATMs are owned by a bank but operated and maintained by a third-party service provider under the Sub-Service Provider (SSP) model. In this arrangement, the bank outsources ATM operations such as cash replenishment, maintenance, and customer support to a specialized vendor. Brown Label ATMs benefit banks by reducing operational costs while ensuring machines are available in varied locations.

Features of ATM

24×7 Accessibility: ATMs operate round the clock, allowing customers to access banking services even when branches are closed.

Multi-language Interface: Most ATMs in India offer multiple language options (English, Hindi, and regional languages), catering to a diverse population.

Card-Based Security: To use an ATM, customers insert a debit or ATM card and enter a Personal Identification Number (PIN), ensuring secure access to their account.

Interoperability: Through networks like National Financial Switch (NFS), customers of one bank can use ATMs of another bank, although charges may apply.

Cash Deposit Facility: Many modern ATMs allow customers to deposit cash or cheques without visiting a bank branch and receive instant credit (subject to verification).

Mini Statement and Balance Inquiry: ATMs provide instant short statements and account balance checks for customer convenience.

Additional Services: Some ATMs offer fund transfers between accounts, PIN change options, mobile recharge, and bill payment facilities.

Uses of ATM

• Cash Withdrawal: The primary use of an ATM is to withdraw a specified amount of cash from one’s bank account.
• Balance Enquiry: Customers can view their current account balance or get a mini statement of recent transactions.
• Cash Deposit: Certain ATMs accept cash and cheque deposits, crediting the customer’s account instantly or after clearing.
• Fund Transfers: Many ATMs permit inter-account transfers within the same bank and, in some cases, interbank transfers.
• PIN Change: If a customer suspects that their PIN is compromised, they can change it directly at the ATM.
• Bill Payments and Recharges: Some ATMs allow payment of utility bills (electricity, water, telephone) and mobile recharges.
• Mini Statement Printing: Customers can request a printed record of their last 5-10 transactions.
• Cheque Book Requests: A few ATMs allow users to request a new cheque book, which is then delivered to their registered address.

How To Use an ATM

1. Locate an ATM: Find a nearby ATM using your bank’s site, a third-party ATM locator app, or GPS.
2. Insert Your ATM Card: Place your debit or ATM card into the card reader slot. Ensure the chip or magnetic stripe is oriented correctly.
3. Select Language: Most ATMs will ask you to choose a language (for example, English or Hindi).
4. Enter Your PIN: Type your 4- or 6-digit PIN using the on-screen keypad. The keys usually have a privacy shield to prevent others from seeing your input.
5. Choose Transaction Type: Options typically include Cash Withdrawal, Balance Enquiry, Deposit, Fund Transfer, and PIN Change.
6. Specify Amount: For cash withdrawals, enter the desired amount (subject to your account balance and ATM’s daily limit).
7. Collect Cash or Perform Service: The ATM dispenses cash. If you requested a deposit, insert the envelope or notes/cheques as instructed.
8. Take Receipt (Optional): The machine may offer a printed receipt. You can choose to take it or skip it.
9. Retrieve Your Card: After the transaction, the ATM returns your card. Always ensure you have the card before walking away.
10. End Session: Confirm on-screen or press the “Cancel/Exit” button so that the machine closes your session.

Benefits of Using ATMs

• Convenience: Access banking services anytime, anywhere day or night without queuing at a bank branch.
• Wider Reach: With thousands of ATMs spread across urban and rural India, cash availability is easier for customers in remote locations.
• Time-Saving: Quick transactions like balance checks, mini statements, and PIN changes save customers’ time compared to visiting a branch.
• Reduced Cash Dependency on Branches: Banks can manage cash distribution efficiently without having to staff every location.
• Secure Transactions: PIN-based authentication and secure encrypted data transmission minimize the risk of unauthorized access.
• Multiple Service Options: Beyond cash withdrawal, many ATMs allow deposits, bill payments, fund transfers, and more.
• Financial Inclusion: White-Label and specialized rural ATMs bring banking services to people who may not have easy access to a branch.

How Much Can You Withdraw from an ATM in India

ATM withdrawal limits depend on the issuing bank and the type of account. Generally:

• Per Transaction Limit: Most ATMs allow withdrawals of up to ₹10,000-₹20,000 per transaction.
• Daily Limit: Banks typically set a daily limit ranging from ₹24,000 to ₹50,000 for savings accounts, depending on the bank’s policy and the customer’s category (for example, standard vs. premium account).
• Cash Availability: The ATM must have sufficient cash loaded by the service provider. In rural or off-site locations, cash availability may be lower.
• Charges: If you use an ATM of a different bank or exceed the free-transaction limit, banks may levy a fee (for example, ₹20-₹30 per transaction beyond your free quota).

To know your exact withdrawal limit, check your bank’s official website or mobile app, or call customer care.

How Do You Make a Deposit at an ATM

Locate a Deposit-Enabled ATM: Not all ATMs accept deposits. Look for machines labeled “Cash Deposit,” “Cheque Deposit,” or “Cash & Cheque Deposit.”

Insert Your Card and Enter PIN: Authenticate yourself by inserting your ATM/debit card and entering your PIN.

Select “Deposit” Option: From the main menu, choose “Deposit” or “Cash Deposit.”

Choose Deposit Type: Some ATMs separate cash and cheque deposit options. Select accordingly.

Insert Banknotes or Cheques:

• Envelope-Based: Older ATMs may require you to place cash or cheques inside a sealed envelope.
• Envelope-Free (Bulk Note Acceptor): Modern ATMs count and verify notes without an envelope. Insert the loose notes in the slot. For cheques, insert the cheque(s) into the designated slot.

Confirm Amount: The machine displays the counted amount (for envelope-free ATMs) or shows a nominal “envelope received” message (for envelope-based machines). Verify that the amount is correct.

Complete Transaction: Confirm on-screen. The ATM dispenses a deposit receipt or a confirmation message. If the ATM cannot verify notes immediately (for envelope-based), the bank may take a few hours to credit the amount after manual verification.

Collect Receipt: Take the printed deposit receipt. It serves as proof until the bank updates your account.

ATM Design Elements

ATMs consist of several key components working together to provide secure and reliable service:

• Card Reader: The slot where you insert your debit or ATM card. It reads the magnetic stripe or chip to authenticate your account information.
• Keypad: A numeric keypad for entering the Personal Identification Number (PIN) and specifying transaction amounts. The keypad often has raised bumps on the “5” key to help visually impaired users orient themselves.
• Screen (Display Monitor): Typically, a color LCD or touchscreen that guides users through menu options. It shows instructions, transaction status, and error messages.
• Cash Dispenser: The mechanism that counts and dispenses currency notes once a withdrawal is approved. It ensures accurate denomination counting and retracts notes if an error occurs.
• Deposit Module: Present in deposit-enabled ATMs; it can be envelope-based (where the customer inserts an envelope with cash/cheques) or envelope-free (bulk note acceptor that counts notes automatically).
• Receipt Printer: Prints transaction receipts, mini-statements, and deposit confirmations on thermal paper. Located near the keypad or screen.
• Security Camera: Monitors the ATM area to deter theft or misuse. The video feed is often recorded and may be centrally monitored by the bank or service provider.
• Speaker/Audio Module: Provides audio guidance for visually impaired customers, reading out menu options and confirmations.
• Safe (Vault): A fortified steel container within the ATM chassis that holds the cash cassettes. It is highly secure, protecting cash from theft.
• Host Communication Module: Internally, the ATM connects to the bank’s central server or switch over a secure network to authenticate transactions and update customer accounts.
• UPS (Uninterruptible Power Supply): Ensures the ATM remains powered during brief power cuts, giving customers a chance to retrieve their card and complete transactions safely.
• Envelope Rejection Mechanism: In envelope-based deposit ATMs, if a deposit envelope does not meet criteria (torn, overstuffed), the machine rejects it back to the user.
• Braille Buttons and Privacy Shield: Keypads often have Braille markings, and privacy shields around the keypad protect PIN entry from prying eyes.