Mahindra, Tata Motors set to ride on RBI push for cash vans contracts

RBI security norms will see orders for 7,000 units valued at Rs 700 crore over the next few months

Mahindra & Mahindra (M&M) and Tata Motors will get a shot in the arm with cash logistics companies (CLC) set to place orders for nearly 7,000 upgraded cash vans valued at about Rs 650-700 crore. This follows a Reserve Bank of India (RBI) diktat calling for stricter security protocols for CLCs given the increasing reliance of banks on outsourced service providers and their sub-contractors.

“It is the biggest such upgrade by the industry, and orders are expected to be placed over the next six months. Each upgraded cash van will cost about Rs 9 lakh. It’s a big capital expenditure for us, but good for light commercial vehicles (LCV) players,” said the chief executive officer of a Mumbai-based CLC.

Top level sources in CLCs said the bulk of the nearly 15,000-odd LCVs currently in use in the business are M&M’s Bolero and Tata Motors’ 207 and 407 series, the Sumo and Yodha range; Isuzu’s offerings and Maruti’s Eeco make up for the rest. A third of the industry’s fleet has to be upgraded to fall in line with Mint Road’s security norms which also stipulate that cash vans cannot cart more than Rs 5 crore during a single trip. This calls for an increase both in the number of trips and additions to the existing fleet.

The big four CLCs — CMS Systems, SIS Prosegur, Secure Value and Brinks Arya — cart almost 70 per cent of the daily average Rs 15,000 crore in cash moved around by these firms daily. In terms of fleet size, CMS Systems tops with over 2,000 cash vans followed by SIS Proseguer with about 1,400.

The upcoming orders for cash vans come at a time of gloom for the auto industry. Data released by the Society of Indian Automobile Manufacturers (SIAM) earlier this week showed a slump in sales across all categories by nearly 16 per cent to 2.01 million units from 2.38 million units in April 2018 – the worst performance in a decade. Sales of utility vehicle fell 6.67 per cent to 73,854 units with that of vans by 30 per cent to 13,408 units. CLCs have in the past tapped both categories in varying degrees while placing orders for cash vans which is now being standardised.

According to RBI circular of April 6, 2018, CLCs have to maintain a minimum fleet size of 300 — owned or leased — and these are to be of specifically fabricated LCVs. They are to have separate passenger and cash compartments with close-circuit cameras covering both these areas; be GPS-enabled and monitored live with geo-fencing mapping with additional indication of the nearest police station in the corridor for emergency. It went on to detail that these cash vans are also not to follow the same route and timing repeatedly so as to become predictable; and that night movements should be discouraged as far as possible.

The circular had said the norms are to be adhered to within three months of its issuance, but CLCs on their part lobbied both the RBI and the Indian Banks’ Association (IBA) that they needed time to comply with the new norms which had also set a minimum net-worth threshold of Rs 100 crore. Lobbying by CLCs paid off as the IBA on its part conveyed to the RBI that the guidelines could result in the disruption of cash loading operations of automated teller machines (ATMs).

A boost for auto industry

• Nearly a third of CLCs’ fleet of 15,000 is to be replaced
• Non-replacement orders of 2,000 on new RBI norms on trips for carting cash 
• Demand seen from the big cash logistic players: CMS Systems, SIS-Prosegur, Secure Value, and Brinks Arya