Cash Deposit in ATM using UPI

Today, you use the Unified Payments System (UPI) to transfer money or to make purchases. Now, there is a new addition to the use case of UPI - you can now even deposit cash in an ATM using UPI as per the RBI's recent announcement. Let us look at the details.

Current cash deposit system in India

At present, if you want to deposit the cash in your bank account, there are two options with you:

• At a Bank Branch: This is the traditional method that has been in practice for a long. You visit your bank's branch and deposit the cash with a customer representative. You are likely to need a deposit slip, which you can usually obtain at the branch.
• At an ATM: Many ATMs now accept cash deposits. You will have to look for a machine with a deposit slot. Next, you need to provide your debit card and PIN details to deposit the cash.

A new announcement by the RBI

Now, you will have an additional option to deposit cash in your bank account. It is a big development for UPI and will make depositing cash even more convenient. Soon, you will be able to deposit cash at Cash Deposit Machines (CDMs) at ATMs using your UPI app. 

It will help users in terms of saving effort and time. The RBI said that this comes from the learning derived from the use of a cardless cash withdrawal system at ATMs via UPI. 

How and when will this take place?

The RBI has not given any date for this feature to go live. All it said was that the feature would be available 'soon'. Also, the operational instructions for this UPI facility are to be released soon. 

It would be on the same lines as the current withdrawal system. Presently, you can withdraw cash from the ATM using UPI, as mentioned earlier. Taking that as a reference, the expected steps for deposits can be:

• Initiate at the ATM: At a Cash Deposit Machine (CDM), you'll likely choose the option for "UPI Cash Deposit" instead of using a debit card.
• Scan the QR Code: The CDM will display a QR code on the screen.
• Open your UPI App: Use your UPI app on your smartphone to scan the QR code displayed by the CDM.
• Confirm Deposit Amount: The UPI app will show the deposit amount detected by the CDM. You can confirm if this matches the cash you want to deposit.
• Select Account and Authorize: Choose the bank account you want to deposit the cash into from your UPI-linked accounts. Then, authorize the transaction using your UPI PIN.

We may see the new feature asking to enter the denomination of bills we are depositing (e.g., number of 100 rupee notes, 500 rupee notes, etc.). Also, the CDM might provide a confirmation slip after a successful cash deposit.

Impact of Cash Withdrawal through UPI on Banks

For banks, the new feature will have both positive and negative impacts. Let us look at them separately.

Positive Impacts

• Increased Efficiency: UPI withdrawals can be faster compared to traditional debit card transactions, potentially reducing congestion at ATMs and lowering operational costs for banks.
• Enhanced Security: UPI's two-factor authentication reduces the risk of card skimming and fraudulent transactions, protecting both banks and customers.
• Encouragement of Digital Payments: UPI withdrawals can further promote the adoption of digital payments, leading to a potential decrease in cash management costs for banks.

Negative Impact

• Reduced Revenue: If debit card usage for cash withdrawals declines significantly, banks might see a decrease in revenue from interchange fees associated with debit card transactions.
• ATM Network Management: Banks might need to invest in upgrading ATMs to support UPI functionality, leading to some initial costs.

Impact of Cash Withdrawal through UPI on Users

The feature will surely make life easy for the users. Here are the benefits of this feature for users:

• Convenience: Users will not have to carry a debit card or remember their account number to deposit cash. So, even if you don't have your debit card handy, you can still deposit money in your bank account.
• Efficiency: The new process will potentially faster transactions compared to the traditional methods we have discussed earlier.
• Security: Utilizing UPI's secure authentication process.

Before you go

The new feature will surely make life super easy for the users. After the go-live, users can use their UPI to deposit and withdraw money from their bank account. It will empower them with enhanced accessibility and efficiency.