What are bank ATMs and how they work?

What is an ATM (Automated Teller Machine) of a bank? What are the various services and facilities which one can avail at the ATMs? How to do transactions at an ATM? Read this article for knowing answers of these and such other questions related to the ATMs?


ATM is abbreviated form of the term 'Automated Teller Machine' which is a computerized machine. It enables a bank customer to access his/her bank account without visiting the bank branch and carry out specified financial transactions including cash withdrawal. Presently there are about 2 lakhs ATMs installed in India. The first ATM in India was introduced by the HSBC bank at Mumbai in the year 1987 and ICICI was the first bank to introduce mobile ATM in India in the year 2002.

Advantages of ATMs

The following are some of the important advantages of using ATMs -
  1. The ATMs provides 24 hours service.
  2. It provides privacy in banking communications.
  3. The ATMs reduce the work load of banks staff.
  4. It may sometimes give customers new currency notes.
  5. Provides safer, convenient and manual error free service.
  6. Reduces risk of carrying cash, particularly during travel.

How ATMs work

The ATMs consists of mainly two input devices namely card reader and keypad. It also consists of four output devices namely speaker, display screen, receipt printer and cash depositor. The card reader reads data from the card when it is inserted or swiped in the ATM and passes on to the host processor (server). The card is recognized when PIN is keyed in. All ATMs are connected to the host processor (server) through internet which provides communication between ATM and host processor. The host processor checks these details with the bank and after matching the details the host processor sends the approval code to the ATM machine for transferring the cash.

Services available at ATMs

The services provided by ATMs may vary from bank to bank and depend on the type of machine installed also. However the following types of services are most commonly offered at the bank ATMs -
  • Cash withdrawal up to the specified limit.
  • Account information/balance inquiry.
  • Mini statement.
  • Cash deposit.
  • Regular bills payment.
  • Loan account inquiry.
  • Purchase or recharge of mobile phone vouchers.
  • PIN Change facility.
  • Stop payment of cheque request.
  • Cheque book requests.
  • How to transact at ATMs

    The following are the basic features of transactions at bank ATMs -
    1. ATM cards, debit cards, credit cards and prepaid cards (which permit cash withdrawal) can be used at ATMs.
    2. The card is inserted or swiped in the ATM and Personal Identification Number (PIN) is required to be entered.
    3. Instructions displayed on the ATM has to be followed.

    What is PIN

    Personal Identification Number or PIN is a numeric password issued by the banks at the time of issue of ATM card. However it is sent by post or handed over to the customer separately. This PIN issued by the banks has to be reset to a new PIN by the customer. Most banks require the customers to change the PIN during the first use itself. The PIN should not be written on the ATM card or the card holder as in such cases the ATM card can be misused if the same is lost or stolen.

    Important facts about ATMs

    Some of the important important facts about the ATMs are as follows -
    1. Generally cards issued by banks can be used at any bank ATM within India in case so enabled.
    2. In case PIN is forgotten or the card is sucked in ATM, the card issuing bank branch should be contacted immediately.
    3. In case the card is lost or stolen, the card issuing bank branch should be contacted immediately for blocking the card.
    4. The card issuing banks set limit for cash withdrawal by customers which is normally displayed at the respective ATM locations.
    5. A limit of Rs. 10,000 per transaction is fixed for cash withdrawals at other bank ATMs.
    6. Five free transactions are permitted per month at other bank ATMs for savings bank account holders.
    7. In case the cash is not disbursed though the account gets debited for the amount, a complaint should be lodged with the the card issuing bank branch immediately.
    8. On raising a request through ATMs, cheque books are processed and sent at the address registered with bank.


  • PIN should be changed after first usage and periodically after that.
  • The customer should conduct ATM transactions in complete privacy by hiding keypad with one hand while keying in the PIN
  • Don't throw your transactions slip in ATM room.
  • Do not take help of strangers at ATM.
  • Block and destroy old card by cutting it into pieces, after getting a new card.
  • Be careful about strangers entering the ATM room while doing your transaction,
  • Insist on swiping your card in your presence at hotels/shops/malls etc.
  • In case any attachments or unusual devices connected to the ATM is noticed, don't perform transactions.
  • Check your account balance periodically.
  • Don't share ATM card and PIN details with anyone.
  • Never choose a PIN based on date/year of birthday of self, spouse, children or telephone number etc. which can be easily guessed.
  • Never leave card in the ATM.
  • Don't respond to any vishing or phishing mails regarding ATM card or PIN.

    White label ATMs

    ATMs set up, owned and operated by non-banks are called White Label ATMs. Non-bank ATM operators are authorized by the Reserve Bank of India under Payment & Settlement Systems Act, 2007. In white label ATMs, scenario, logo displayed on ATM machine in ATM premises pertain to WLA operator instead of a bank.

    New developments/initiatives in ATMs

    1. ATM without PIN - Recently DCB Bank has started an Aadhar card based ATM at Mumbai where the customers can transact without using PIN. Their biometric details instead of the PIN is used for authentication. The customers are required to identify themselves by putting their finger on the scanner which is better as PIN can be lost or forgotten.
    2. ATM for visually challenged - Special ATM machines with a voice guided system and specially made function- display keys for visually challenged people has already been introduced by ICICI bank. Such ATMs are equipped with Video Surveillance devices.
    3. ATM on wheels - The ICICI bank has started 'ATM on wheels' service which is connected to the central data base of the bank through the GPRS technology (General Packet Radio Service). The movement of the Mobile ATM is tracked using the Global Positioning System (GPS) and is monitored by the 24 hour ICICI Bank ATM help desk.
    4. Video interaction - Some of the ATMs provide customers an option of video interaction with bank officials.
    5. Online alarm - Some of the ATMs of SBI, HDFC Bank and Axis Bank have installed online alarm system. In such cases alarm is set off as soon as the ATM senses a hammer or drilling or attempts to break open the ATM.
    6. Choose notes - IndusInd Bank gives customer a choice on which denomination of note they need from ATM.
    7. Withdraw cash using mobile - ICICI Bank provides customers an option to withdraw cash from ATM without using their ATM card but with the help of their mobile.


    ATMs offer hassle free service 24X7 and are conveniently located at traditional locations like bank premises as well as at non-traditional locations like supermarkets, airports and shopping malls etc. However sometimes ATMs may be off-line in case the system is down. Also fee is charged by banks to use ATMs of other banks beyond specified limit. Further it requires extra alertness on the part of the customer to maintain security. However the use of ATMs is increasing day be day and newer features are being added by banks to make the experience more convenient.

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    Author: K Mohan30 Apr 2016 Member Level: Platinum   Points : 4

    I do understand that ATM's have become user friendly and for those who does not have time to do banking leisurely can use the ATM facility even at the odd hours of the day and thus one can ensure 24 hours banking at our disposal. With the advent of ATM's many people are not carrying the hard cash with them but simply carry the bank cards through which they can withdraw the money at any given time. But care must be taken that you withdraw the money from your bank ATM's only otherwise service charges may be levied. More over I want to make a suggestion here that every ATM must have a hotline facility to the branch or the customer care center where in certain problems faced during withdrawal or transactions could be redressed. For example the card might have been read, but we wont get the cash or we type higher denomination and got lesser cash etc. Some ATM's have facility to withdraw only in the denomination of 500 and not 100. So all these problems for the new user are not addressed and he has to wait for next day when the bank opens to tell his complaints.

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