New compliance costs and the low interchange fee of Rs 15 a transaction could force closure of approximately 100,000 off-site and a little over 15,000 white-label automated teller machines (ATMs), or 50 per cent of the installed base of 238,000 units, the Confederation of ATM Industry (CATMi) has warned.
The industry lobby group said this was the fallout of additional costs brought about by the recent regulatory guidelines for hardware and software upgrades, mandates on cash management standards, and the cassette-swap method of loading cash, which the industry could not afford. It said a large number of ATMs in non-urban locations might be shut down, affecting beneficiaries under the Pradhan Mantri Jan Dhan Yojana who withdraw subsidies in the form of cash through ATMs.
“New regulatory requirements have come in, so ATMs need to be upgraded. We have basically two types of ATMs — one being our own machines, which we will be upgrading, and the second type, which belongs to vendor. The bank is talking to vendors and trying to find a solution,” said P K Gupta, managing director (retail & digital banking) SBI.
The Indian Banks’ Association had requested the RBI to relax norms or extend the deadline for cash management, but it remained firm on its original mandates, a spokesperson for a private bank said.
Even as the ATM industry was still reeling from the effects of demonetisation, the additional compliance requirements by the central bank called for a huge cost outlay.
“The service providers do not have the financial means to meet such massive costs and may be forced to shut down these ATMs, unless banks step in to bear the load of the additional cost of compliances,” CATMi said, adding that additional compliance requirements were not factored into their contracts with banks.
“We have had individual discussions with banks but I believe that regulatory intervention is necessary to make banks bear the costs. We also made recommendations to the RBI,” said Himanshu Pujara, director, CATMi. He added that no conclusion was likely from these talks before February when the new mandate kicks in.
The tussle is between ATM players and banks as to who would bear the additional costs. The ATM industry argues banks should bear the cost while the latter point to the strain if all costs are to be absorbed by them, especially in the light of lower interest income and pressures on other income.
Earlier this year, the IBA sought relaxation on the time-frame to meet the conditions like a net worth of Rs 1 billion by cash-in-transit (CIT) firms, new transport and security parameters. It pointed out the stringent standards had the potential to disrupt the functioning of ATMs.
ATM players say that ATM numbers have been stagnant post-demonetisation, even as the number of bank accounts and debit cards rose exponentially during the same period. The number of ATMs have dropped by 1,156 units over the past year and stood at 220,000 as of June 2018.