Half of ATMs may be shut down by March
Costs have gone up for ATM operators, cash management companies owing to some new rules by the RBI
Recently, the automated teller machine (ATM) industry stated that nearly 50% of ATMs may be shut down by March 2019 due to unviability of operations. “ATM operating costs have increased substantially along with additional compliance costs. The long-term profitability of ATM industry and sustainability is looking challenging at this point of time. The current ATM penetration in India is quite low compared with other nations and shutting down of existing ATMS will lead us to trail further,” said Radha Rama Dorai, managing director-ATM and Allied Services, FIS. The ideal road ahead to make the ATM management ecosystem sustainable is through mutually agreeable costing model, while renegotiating the existing servicing contracts, said Dorai.
The rise in costs
There are three types of ATM deployment models. “Banks deployed inventory, outsourced model where ATM companies managed the services and ATMs managed in smaller cities are the three models. The last model is under severe threat as they were in the low usage centres. There if you say that the cash van should have different configuration and security parameters, it will get expensive. For instance, ATM has four cassettes of different denominations. Based on the average use, the cash is loaded. Now RBI wants the ATM industry to provide warehouse of cassettes which is predefined for denomination, fill it in the warehouse and then send the cassettes. That is significant cost to create inventory,” said a private bank official.
What it means for you
Bankers and ATM providers say if the issue is not addressed the point to withdraw cash will get reduced.
“There won’t be cash crunch. The use of ATM is more than pre-demonetization. People who used to go to bank branches have started going to ATMs. As of now, in spite of all the actions the industry has undertaken, cash is not getting completely substituted by electronic transaction. There is a need for cash. For instance, if you have to pay Rs 200, cash would be more convenient at the moment than digital,” said a banker.
It will take a while for the issue to be resolved. Meanwhile, there are multiple digital options that are available for transactions currently, which you can consider.
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