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

The Reserve Bank of India (RBI) on Monday asked financial institutions providing small loans to monitor any pressure building up in their loan books. Let's find out what the RBI report says.

RBI Banking Report: The Reserve Bank of India (RBI) on Monday asked financial institutions providing small loans to monitor any pressure building up in their loan books. In its 'Trends and Progress in Banking' report for the financial year 2024-25, the RBI said that loan disbursement remained subdued in the southern states during the current financial year.

This report comes amidst several measures impacting the industry in Karnataka and Tamil Nadu.

What does the report say?

According to the report, the industry has taken several steps to improve performance. However, if pressure increases in this sector in the future, regulated entities will need to continuously monitor the situation.

Lenders have faced challenges in the microfinance segment in the last few quarters, leading to excessive debt burden on borrowers. As a result, the industry collectively adopted some safeguards, including limiting the number of loans given to a single borrower.

Number of ATMs decreased

The number of ATMs used for cash withdrawals saw a slight decline during the financial year 2024-25, while the number of bank branches increased. This information was provided in the RBI report.

According to the report, a total of 2,51,057 ATMs were operational across the country by March 2025, compared to 2,53,417 a year earlier. Private sector banks saw a comparatively larger decline in their ATM network.

Private bank ATMs decreased

The number of ATMs of private banks decreased from 79,884 a year ago to 77,117. Meanwhile, the number of ATMs of public sector banks decreased from 1,34,694 to 1,33,544. The report states that the decline in the number of ATMs was primarily due to the increasing adoption of digitalization and the closure of ATMs by both public and private sector banks.

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