The Indian ATM industry, according to a report released on Wednesday is not in the pink of health. The Confederation of ATM Industry (CATMi) warned that non-viable economic conditions and regulations could lead to closure of nearly half of the country's ATMs by March 2019. At risk are the country's 238,000 ATMs. Of this, the association says 113,000 ATMs including 100,000 off-site ATMs and 15,000 white-labelled ones are expected to shut shop.
CATMi's spokespersons have been quoted in several reports saying that a shut-down of ATMs could lead to job losses and hit the financial inclusion measures severely. Majority ATMs which may face shut down are situated in non-urban areas, said CATMi, underlining that this can impact the financial inclusion efforts as beneficiaries use the machines to withdraw government subsidies.
CATMi's spokesperson was quoted saying, "This [Closure of ATMs] would severely impact millions of beneficiaries under the Pradhan Mantri Jan Dhan Yojana who withdraw subsidies in the form of cash through ATMs, besides urban centres, resulting in snaky queues and chaos akin to post-demonetisation," said the spokesperson.
Some of the regulations that the ATM industry believes that could lead to closure are recent regulatory guidelines for ATMs hardware and software upgrades, and mandates on cash management standards and a Cassette Swap method of loading cash.
On Friday, NCR's Managing Director Navroze Dastur was quoted in a PTI report as saying, "There is a need for the banks, managed service providers (MSPs) and the regulators to discuss and resolve the issues, just like we had done during demonetisation."
He further explained that costs had gone up without a corresponding increase in revenues. This was owing to contracts between ATM service providers and banks linked on a per transaction basis. Dastur believes that MSPs (Managed Service Providers) and white-labelled ATM operators will be the most impacted.
Managing an ATM requires heavy investment and daily maintenance costs. Service providers have explained that setting up an ATM required a generator, an ATM machine, rent, computer maintenance, costs of generator etc. Earnings on the other hand, service providers say, has not appreciated correspondingly.
At the heart of the ATM's industry fears are guidelines associated with ATM business. On April 6, the RBI came out with a fresh list of expectations and mandates. These include:
- Maintenance of Rs 100 crore all the time.
- Fleet of 300 fabricated cash vans equipped with CCTV cameras, GPS, wireless communication, hooters. Also, two custodians and two armed security guards should man this cash van.
- ATM service providers should use lockable cassettes for cash replenishment.
- Implementation of a Cassette swap system in all ATMs
The Reserve bank asked banks to implement the new measures within 90 days. And On June 21 it subsequently asked banks to also ensure BIOS password protection for all ATMs.
Besides the RBI, the ministry of home affairs too notified the industry of a new rule after observing an increase in ATM linked frauds. The MHA notification mandated that there will be no cash loading of ATMs or cash transportation activities after 9 pm in urban areas, 6 pm in rural areas and before 9 am or after 4 pm in districts notified by the Centre as Left Wing Extremism affected areas.
Will it lead to days of demonetisation?
Talks of a probability of ATMs facing shutdown have resulted in fears of job-loss. There are also fears of loss in business for ATM service providers including third-party agencies currently replenishing ATMs.
While the ATM industry's concerns gives the current situation a threatening outlook, and place it eerily similar to the days of post-demonetisation, experts say that the probability of such an occurence is unlikely. The government and the banking regulator may step in to prevent such occurrences.
At the heart of CATMi's assertion is the fact that earnings have not increased in line with costs. CATMi's Director V Balasubramanian was quoted in a report saying, "Transactions have increased tremendously for ATMs. So if you compare pre-demonetisation period to now, it has gone up several times."
The Hindu reported in a July'18 that the ATM industry was staring at a expenditure of Rs 3200-4800 crore for cassette swap in ATMs. Radha Rama Dorai, Managing Director for FIS, a banking software and hardware solution provider had been quoted saying that the move prevented pilferage and reconciliation issues for the bank. Bankers however were not enthused with the directive considering the huge upfront capital expenses. The cost of procuring each cassette had been pegged at Rs 20,000 per unit.
Banks, back then said that ATMs operating within premises of branches were adequately secure and need not implement the cassette directive.
Talks of a probability of ATMs shutting have lead to worries of demonetisation version 2. However a reading of RBI's annual data can assure that this could be unlikely. RBI's annual payment systems indicator says "ATMs deployed witnessed a marginal decline from 2,22,475 to 2,22,247.[RBI Annual Report on Payment Systems and Information Technology- August 29 2018]"
Reports so far have also said that cash was back to pre-demonetisation days. Such reports link the cash component to hint that a second version of the demonetisation may be on-coming. However, such reports do not compare the increase in volume of transactions conducted via cards.
RBI's assessment shows both credit and debit card transactions nearly doubling in two years. While the volume and number of Prepaid Payment Interfaces has dropped, the total card payments has increased from Rs 4483 billion (August 2015-16) to Rs 10607 billion (Aug 2017-18).
Talks of unviability in the ATM industry may prompt policy makers to consider an increase in interchange fee. This too, after much deliberations and persuasions. however to claim that dwindling revenues for 15,000-18,000 white-labelled ATMs could derail the financial efficiency of the country's ATM channel appears premature.