The Reserve Bank of India (RBI) on Monday asked financial institutions offering small-value loans to monitor their loan books for stress. Let's find out what the RBI report says.

Alarm bells ring for small loans! RBI alerts microfinance institutions, as ATM numbers in the country decline

RBI Banking Report: The Reserve Bank of India (RBI) on Monday asked financial institutions offering small-value loans to monitor their loan books for stress. In its "Trends and Progress in Banking" report for fiscal year 2024-25, the RBI said that loan disbursements remained low in southern states during the current fiscal year.

The report comes amid a series of measures affecting the industry in Karnataka and Tamil Nadu.

What does the report say?

Accordingly, the industry has taken several steps to improve performance. Furthermore, if pressures in the sector increase in the future, regulated entities will need to continue to monitor this.

Lenders in the microfinance segment have faced challenges over the past few quarters, leading to excessive debt burdens among borrowers. Consequently, the industry has collectively adopted safeguards, including limiting the number of loans granted to a single borrower. 

The number of ATMs has decreased.

The number of ATMs used for cash withdrawals declined slightly during the financial year 2024-25, while the number of bank branches increased, according to an RBI report.

According to the report, a total of 251,057 ATMs were active across the country as of March 2025, compared to 253,417 a year earlier. Private sector banks' ATM networks have seen a comparatively greater decline.

ATMs of private banks reduced

Private bank ATMs fell to 77,117 from 79,884 a year earlier. Public sector bank ATMs fell to 133,544 from 134,694 a year earlier. The report notes that the decline was driven by increasing digitization and the closure of ATMs by both banks.

However, during the same period, the number of independently operated white-label ATMs increased to 36,216. Public sector bank ATMs are evenly distributed across rural, semi-urban, urban, and metropolitan areas, while private and foreign banks focus primarily on urban and metropolitan areas.