Banks set to miss fourth deadline to roll out cassette-swap system for ATMs

Banks, cash handling firms, and managed service providers are yet to work out the absorption of costs involved in the trade as well as the logistics of switching to the new system

A proposal for switching from open-trays of cash to a cassette-swap model at automated teller machines (ATMs) has missed its deadline again – the fourth in a row.

 

A cassette-swap is a lockable mechanism where cash is loaded by cash-in-transit (CIT) firms into so-called cassettes; and the task of accounting for cash in it from the previous replenishment at ATMs is made simpler. This is a departure from the practice of personnel at these entities physically loading cash into trays placed inside the ATM.

 

The four-phased cassette swap plan across 30 cities was to cover the network of 260,000-odd ATMs in the country by FY24, and was set in motion six years ago in April 2018, with the first deadline set for FY21. Last year, the Reserve Bank of India had said that cash recycler machines (CRMs) – in which you can both deposit and withdraw cash – need not adhere to the cassette swap method; and it would also not apply to banks’ onsite ATMs as cash can be loaded from within the branches.

 

Under the four-phased plan, Bangalore, Delhi, Chennai, and Kolkata were supposed to have been covered by June 2023, followed by Ahmedabad, Mumbai, Bhubaneswar, Raipur, Hyderabad, Jaipur, Lucknow, Coimbatore and Pune by September 2023. By the end of the December quarter in 2023, Vizag, Bhopal, Ludhiana, Guwahati, Agra, Vadodara, Patna, Vijavawada, and Chandigarh would have been covered, and by the of fiscal 2024, Surat, Nagpur, Indore, Jamshedpur, Goa, Cochin, Kanpur, Ranchi were also supposed to have switched to the cassette-swap model.

 

However, despite having missed three previous deadlines, banks have now missed the latest one as well, set for the end of FY25.

 

According to sources, banks, CIT firms, and managed service providers are yet to work out the absorption of costs involved in the trade. Each cassette costs between Rs 12,000 and Rs 15,000, and its procurement in large quantities is difficult since it requires significant capital expenditure. While there has been a hike in the inter-change fee from Rs 17 to Rs 19 recently, how much of this is to be shared with CIT firms is yet to be resolved. The interchange is what a bank pays another bank when it’s debit or credit card on the latter’s ATM.

 

Of the installed base of 260,000-odd ATMs, about 25-30 per cent are recyclers. While recyclers are priced at around Rs 5.50 lakh per unit compared to the Rs 3 lakh for a basic cash-vending ATM, the bet is that it may, over time, reduce the cost of cash loading.

 

“The issue is cassette swaps are a bit hard to execute outside of the big metros and cities. Our vans can either carry cash or cassettes. Right now, banks have legacy ATMs and CRMs, and we need to get a clear picture to streamline logistics and the costs involved,” said a banker, who declined to be identified for this article.

 

When banks sought an extension to the end-March 2024 deadline for cassette swaps, the RBI had held a stock-taking meeting with the Cash Logistics Association (CLA). It was conveyed to banks that it would have preferred a better ground report. The CLA, on its part, submitted a 'confidential update' to the banking regulator which set up an internal committee to monitor developments.

 

The decision to switch to the cassette-swap model for loading cash in ATM flows from the D K Mohanty Committee on Currency Movement set up in October 2016 to examine and mitigate risks arising from open-cash replenishment. On April 12, 2018, the central bank asked banks to shift to lockable cassettes in a phased manner covering at least one-third of ATMs and such that all ATMs move to the cassette model by FY21.

 

The ATM cassette-swap world

• It uses lockable trays, not open-tray replenishment at ATMs
• Cash-in-transit (CIT) firms will not have to physically load cash
• The task of taking into account the amount of cash remaining from the last cassette load is made simpler
• It cuts down on counterfeit notes as well as discrepancies in cash accounting