ATM cash crunch: Inactive point of sale terminals to be redeployed

A large chunk of point of sale (PoS) terminals set up after demonetisation are inactive and need to be redeployed, industry players have said.

The Indian government set a target for banks of deploying an additional one million PoS terminals after demonetisation. Following this, the number of PoS terminals went up from 1.5 million in the pre-demonetisation period to over three million in February 2018, according to RBI data.  

However, PoS monthly transactions, both in terms of volume as well as value, are roughly at the level of the pre-demonetisation era. Barring the spike in December 2016 due to note ban, PoS transactions have remained stagnant in the 14 months since then.

“After note ban, banks set up terminals in a rush. There were a lot of merchants who did not require PoS terminals. These merchants did not know what to do with the PoS terminals and returned them,” said Dewang Neralla, CEO, Atom Technologies, a leading payments service provider.

“Post-demonetisation, banks had deployed PoS terminals as they had strict targets to meet. But post April 2017, banks started analysing the profitability of these terminals having realised that a lot of them were inactive," said Avinash Luthria, business head-financial processing & licensing at Worldline Global, South Asia & Middle East.

The number of PoS terminals deployed has also stagnated since April 2017 as confirmed by RBI data and industry experts, due to inactivity of existing PoS machines. But PoS transactions are expected to pick up as banks undertake strategic deployment of PoS machines. 

Luthria said the segment is witnessing a period of slower transactions, which will rationalise once the redeployment process is complete. Neralla said the demand for PoS terminals was increasing from a new set of merchants. 

The government had earlier waived the merchant discount rate, the charge for POS transactions, up to Rs 2000 on debit cards. Neralla said this would give further boost to PoS transactions. 

While the pick-up in PoS transactions has been low in rural areas, the rural population uses these terminals as a mini-ATMs, Neralla said. The State Bank of India (SBI) has also urged customers to withdraw cash using the Cash at PoS feature.

According to RBI guidelines, customers can withdraw Rs 1,000 in Tier-I and -II cities, while Rs 2,000 can be withdrawn in Tier-III to Tier-VI cities per day per card. Currently, SBI won’t charge any fee for the PoS cash withdrawals.