Earlier this month, the Confederation of ATM Industry (CATMI) said that 50% of the existing ATMs in the country may shut down by March 2019. According to the Reserve Bank of India, there are 221,492 ATMs in the country as of September. We take a look at what are the issues that are being raised, why have they come up now and how can these be resolved. 

The issue 

Costs have gone up for ATM operators and cash management companies owing to some new rules by the ministry of home affairs and RBI. The ministry of home affairs in April 2018 notified rules for cash management companies to enhance security. RBI also changed rules regarding cash handling and loading cash into ATMs in August 2018 (read here: and her ).

The new rules include using lockable cash holding cassettes for ATM machines to avoid direct handling of cash while loading and unloading in an ATM, installing anti-skimming hardware and updating software. While ATM operators said they agree that these are best of global practices, the overall extra expenditure required for these upgrades, according to them, is around 6,000 per ATM per month, a CATMI spokesperson said. The industry body has estimated an expenditure of 3,500 crore for complying with the new cash logistics and cassette swap method.  

Possible solutions

ATM operator companies are demanding that either banks bear the additional expenditure incurred on the upgrades and security measures or reimburse the operators.

The other way out is increasing the interchange ATM fee from 15 for cash transactions and from 5 for non-cash transactions. This is the fee that a card issuing bank pays to the bank whose ATM is being used for a cash transaction like withdrawal of money. A CATMI spokesperson said the interchange fee was last revised in 2012, when it was brought down from 18 to 15. Of the 15, between 8 and 12 goes to the ATM operating company. Also, banks pay the interchange fee of 15 per cash transaction to white-labelled ATM service providers. These are ATMs that are not affiliated to a bank. There are about 15,000 such ATMs. For a non-cash transaction, like balance inquiry, the interchange fee is 5, which was reduced from 8 in 2012.  

The challenge: Though all banks issue debit cards, the rate of issuance for some banks is higher vis-à-vis their own ATM network and its expansion. Such banks prefer paying interchange fee for their transactions. Hence, it is difficult to have a consensus on increasing the fee.  

The impact

The ATM industry says that they will gradually stop operating and servicing ATMs that have a low transaction volume and are located in rural or semi-urban areas. The cost of operations, according to the industry, is higher in rural and semi-urban areas due to connectivity and power supply constraints.

So the impact will be harder in these areas as the ATM density is already low there. With higher costs and lower volumes, those could be the first ones to stop being serviced.

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