The ₹10,000 fine if ATMs run dry for over 10 hours could raise lenders’ expenses to ₹125-200 cr
The guidelines will sound the death knell for the ATM industry, said a CATMi director
The Reserve Bank of India’s (RBI’s) decision to penalize banks ₹10,000 if ATMs run dry for over 10 hours is likely to increase the expenses for all lenders to ₹125-200 crore, according to initial estimates by ATM operators and cash logistics companies.
“The guidelines will sound the death knell for the ATM industry. We are shocked at the timing of this circular. When lockdowns have been put in place because of the covid-19 pandemic, how do they expect us to implement the guidelines? These guidelines were not thought through and have been introduced without any consultation. If this is implemented, there would be no option but to shut down existing ATMs," said a director of the Confederation of ATM Industry (CATMi).
The industry body has written to the banking regulator, registering its protest and requested a review of its decision. An ATM typically goes out of cash six times every month, according to industry experts. Nearly 50% of the 213,000 ATMs are faced with this problem. The biggest financial burden will be borne by State Bank of India (SBI), which has nearly 64,000 ATMs.
“The regulations are well intentioned. We are not handling the entire business. All penalties are passed on to the vendors. They are clearly not comfortable and have protested against this. We will have to find a way so that vendors and banks don’t lose money," said an SBI official.
The regulations come at a time when banks are in the midst of implementing RBI’s 2018 circular, which requires them to transport cash in cassettes, sticking to the government’s prescribed hours of the day. At present, most ATMs are replenished by open cash top-up by loading cash in the machines on the spot. To do away with the existing system, RBI has asked banks to ensure lockable cassettes are swapped at the time of cash replenishment in ATMs and this should be implemented by March 2022.
“It’s been four years since RBI came out with the cassette swap guidelines and banks have not done anything till date. Banks are clearly not inclined to do it because of huge costs. There is a need to have some discussion with stakeholders before RBI comes out with such guidelines," said the CATMi director.
Imposing a penalty will not solve the availability of cash in ATMs, according to ATM operators, or managed service providers (MSPs). Banks need to ensure proper cash forecasting and also make sure ATM-fit currency is available on time. However, the ministry of home affairs (MHA) has restricted cash movement after 8 pm in urban areas, 6 pm in semi-urban areas and 4 pm in rural areas. “By the time we get the cash from banks, it is already noon. So I cannot be held responsible for ensuring ATM cash availability if banks are not ready to give cash indents on time. We get paid less than ₹10,000 for managing an ATM per month. If the penalty is for each instance of cash out, it would mean our payout will be more than our revenue," said Rituraj Sinha, group managing director, SIS, the largest security and cash-in-transit company.
Banks said it will not be viable to operate ATMs if there are more restrictions and they may have to rely on other bank ATMs for transactions. However, transactions through digital channels are picking up and that too at a lower cost and banks will see more and more transactions moving online, thereby reducing the burden on ATMs.