Increased costs to meet new security norms may force an automated teller machine (ATM) operators to close the money-dispensing machines.
A non-profit trade association warned on Wednesday (November 21) that nearly 50 percent of the country’s 2.38 lakh ATMs face the risk of being shut down due to fresh guidelines issued by the RBI.
The Confederation of ATM industry (CATMi) said at least 1.13 lakh ATMs, including one lakh off-site units and 15,000 white-label ATMs. White-label ATMs are those operated by non-banking financial corporations.
The ATMs may cease to exist as early as March 2019. The industry body said the move will drastically impact “non-urban” areas.
ATM operators worried
CATMi director V Balasubramanian told news agency IANS that the recent regulatory guidelines issued for hardware and software upgrade of ATMs have led to higher costs and that ATM operators have reached a “tipping point”.
Listing reasons that have jolted the ATM industry, Balasubramanian highlighted recent mandates on ATM cash management standards and the cassette-swap method – both of which have been recommended by the Reserve Bank of India (RBI).
The Cassette-swapping method will enable operators to quickly replenish exhausted ATMs. The central bank has asked for the integration of lockable cassettes for adding an extra layer of security as well.
Earlier in April, the central bank had asked banks and ATM operators to tighten regulations in order to prevent rising fraudulent activity apart from its larger goal to contain bad loans. However, neither banks nor ATM operators are happy with the RBI’s mandate, which is expected to cost them at least Rs 4,800 crore.
CATMi suggested that the new cash logistics and cassette-swap method will alone cost in excess of Rs 3,500 crore.
“To implement all these securities, the software-hardware directive would entail an additional cost of minimum Rs 1.5 lakh per ATM per month. This works out to astronomical figures for all the 2.38 lakh ATMs in the country,” Balasubramanian explained.
The ATM industry, including managed-service providers, brown-label ATM deployers (third-party ATM operators) and white-label ATM operators, is not happy with the fresh move as there is no clarity on whether banks are required to bear the additional cost of meeting guidelines.
“The situation has further deteriorated now due to the additional compliance requirements that call for a huge cost outlay. The service providers do not have the financial means to meet such massive costs and may be forced to shut down these ATMs,” said CATMi.
Balasubramanian went on to suggest that there is no possibility of continuing operations if the operators are not compensated by the banks for making the initial investments.
Impact of closing ATMs
While a majority of ATM operators and service providers would be forced to give up their licenses, the closure of such high number of ATMs will make life harder for citizens, especially in rural areas where cash use is still widespread.
“This would severely impact millions of beneficiaries under the Pradhan Mantri Jan Dhan Yojana [PMJDY] who withdraw subsidies in form of cash through ATMs, besides urban centers, resulting in snaky queues and chaos akin to post-demonetization,” he said.
There are millions of people living in rural areas who predominantly use ATMs for withdrawing cash on a daily basis. In such a scenario, closure of over one lakh ATMs may lead to a situation of panic, as witnessed after demonetization.
Adding to the woes, 10 percent of all ATMs in the country are non-operational at any given time due to various reasons such as unavailability of cash or system malfunction. Considering the facts, a further reduction in the number of ATMs in the country would be perilous, especially in remote areas.
Barring urban areas and metro cities, people living in the interiors of states such as Uttar Pradesh, Maharashtra, Bihar, West Bengal, Madhya Pradesh, and others have to travel over 40 km or more to access an ATM, according to industry experts.
Lowest ATM penetration
Not just rural areas but the urban populace may also bear the burden of lesser ATMs. According to CATMi, a total of almost 7-10 lakh ATMs are required in the country to adequately cater to the population of the country.
It is worth mentioning that India has the lowest ATM penetration globally, with an average of 8.9 ATMs for one lakh people in comparison to 119.6 in Brazil, 78 in Thailand and 60 in South Africa.
While the RBI has refused to ease its stand, the closure of over 1 lakh ATMs would take a heavy toll on the county’s ATM count.
News Credit: India Today