RBI, Home Ministry circulars on ATM security, logistics miss deadlines

Software upgrade of bank ATMs will be delayed

The Reserve Bank of India’s (RBI’s) and Ministry of Home Affairs’ (MHA’s) circulars pertaining to the security features of automated teller machines (ATMs) and business logistics have gone unheeded. 

These circulars, issued between April 2018 and August 2019, concern issues ranging from Windows 7 software upgrades at ATMs, anti-skimming card-readers to enhanced security details to be complied with by cash-in-transit firms.

Banks are now set to miss the Windows 7 software upgrade deadline of January 2020, even as complaints received by the banking ombudsman on ATM and debit-card transactions rose to 36,539 in 2018-19 (FY19), from 24,672 in 2017-18, according to the RBI’s Report on Trend and Progress of Banking in India (FY19).

Non-adherence to the regulatory diktats is a reflection of the turmoil in the ATM business. It started with the central bank’s white-label ATM policy, which allowed non-banks to come in a big way, given that a lot of banks were not willing to go deep into rural areas. “The interchange fee then was pegged at Rs 18, but it went down to Rs 15 and impacted the whole business model,” says an industry source. Repeated lobbying attempts to hike the interchange to Rs 18 have not borne fruit.

The central bank in its circular of June 21, 2018, had called for banks’ attention to their non-adherence of the standards set by it despite repeated confidential advisories of March 6 and November 1, 2017.

“The slow progress on the part of banks in addressing these issues has been viewed seriously by the RBI. The vulnerability arising from the banks’ ATMs operating on unsupported version of operating system and non-implementation of other security measures, could potentially affect the interests of the banks’ customers adversely, apart from such occurrences, if any, impinging on the image of the bank”.

An earlier circular issued on April 12, 2018, on lockable cassettes in ATMs instead of open-cash replenishment has also not been fully complied with. Banks had sought the intervention of the Ministry of Finance, given the costs involved, which has been estimated to be around Rs 6,000 crore for the industry. By 2020-21, 60 per cent of ATMs were to be serviced through cassette swapping, but this deadline is also set to be missed.

Another pain-point is the central bank’s circular of April 6, 2018, asking cash logistics companies to maintain a minimum fleet size of 300 — owned or leased — comprising specifically fabricated light commercial vehicles. The MHA notification on August 8, 2018, reiterated the conditions set forth in the RBI circular. The deadline for this expired a year ago.