Notes worth more than 1.2m rupees (£13,300; $17,600) had been shredded – and the suspected culprits are rats.
Police said the rodents probably entered the machine through a hole for wiring, the Hindustan Times reported.
Pictures of the chewed cash at the State Bank of India branch in Tinsukia district were widely shared on Twitter.
One shows a dead rodent lying in the debris.
According to BBC, Police official Prakash Sonowal said that the machine had been out of action for about 12 days.
Technicians who took the unit apart found banknotes of 2,000 and 500 rupee denominations destroyed. They managed to salvage another 1.7m rupees, officials said.