Banks struggle with ATM shortage as 'Make in India' policy disrupt supply

The initial cause of low number of ATMS across India is linked to the "Make in India" guidelines introduced in FY20, which required vendors to establish operations in India, leading to a delay

Banks have raised concerns with the government and the Reserve Bank of India (RBI) regarding the shortage of automated teller machines (ATMs). They also emphasised the need for clear guidelines on procurement through the government e-marketplace, known as the GeM portal, according to a report in The Economic Times.

The report quoted a senior bank executive as saying that a major challenge is the insufficient capacity among ATM vendors.

‘Make in India’ delay

According to industry sources, the primary cause of the low capacity is attributed to the ‘Make in India’ guidelines introduced in FY20, which mandated vendors to set up operations in India, resulting in delays.

The Indian ATM market is predicted to grow at a compound annual growth rate of 9.2 per cent from 2024 to 2032. Another bank executive, as mentioned in the report, pointed out that state-run lenders also encounter a restriction due to mandatory procurement via the GeM portal.

“Not all ATM vendors are registered there, and we also need more clarity on the process and guidelines to avoid any vigilance action,” he said, adding that banks have sought a meeting with officials from GeM.

He further said that they have proposed allowing banks to independently issue requests for proposals (RFPs) for ATMs, provided all guidelines are adhered to.

ATM shortage affecting bankers

Recently, bankers have indicated that the shortage of ATMs is significantly impacting them, particularly as they transition to lockable cassette mechanisms in ATMs, in accordance with RBI directives. In 2023, the RBI instructed banks to upgrade their ATMs to allow cassettes to be swapped during cash replenishment instead of being filled directly at the machines.

The report quoted the above-mentioned bank executive as saying that although this was intended to occur gradually, we are falling short of our targets, which could result in regulatory measures such as fines. He said that around 30 per cent of implementation has been done in vendor-managed ATMs.

Cash recycling machines

Manjunath Rao, president - managed services & technology solutions at CMS Info Systems, which operates 47 per cent of overall outsourced ATMs in India, said that apart from ATMs, banks are currently installing cash recycling machines to improve efficiency and enhance the customer experience.

“GeM is a robust portal and as banks do a technological refresh of ATMs, we expect the demand to grow, and the industry is ready to meet it,” Rao said, as quoted by the report.