The operators of automated teller machines (ATMs) are finding it difficult to cope with the new regulatory requirements as a result of which the number ATMs, which have become the backbone of Indian economy, may gradually come down by 1.13 lakh next year from the existing 2.38 lakh. According to Confederation of ATM Industry (CATMi), the apex body of the domestic ATM sector, service providers may be forced to close down about 1.13 lakh ATMs by March 2019. This includes about 1 lakh off-site ATMs located in non-urban areas. Banks usually outsource ATMs to service-providers for improving efficiency of their services. A CATMi official said the closure is due to non-viability of the operations brought about by the recent regulatory guidelines for ATM hardware and software upgrades, recent mandate on cash management standards and the “cassette swap” method of loading cash, by the Reserve Bank of India (RBI) and Union Home Ministry. For example, the minimum net worth requirement for the ATM operators has been has fixed by the RBI at Rs 1 billion. They are supposed to have a minimum of 300 specifically fabricated cash vans and the cash should be transported only in the owned or leased security cash vans. “The passenger compartment should accommodate two custodians and two armed security guards, besides the driver. Each cash van should be GPS enabled and monitored live with geo-fencing mapping. Each cash van should have tubeless tyres, wireless communications and hooters,” the RBI guidelines say. The RBI has also issued stringent guidelines in order to mitigate risks involved in open cash replenishment and it has been advised that banks should have lockable cassettes in their ATMs which will be swapped at the time of cash replenishment.

“Due to this possible shutdown, the financial inclusion programme may be severely impacted as millions of beneficiaries under the government’s Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, who withdraw subsidies in the form of cash through ATMs, may find their neighborhood ATM shut. This may result in long queues and chaos,” said the official, adding that “it may also lead to considerable job losses.” CATMi said that its members, which include the ATM service-providers, brown-label ATM deployers (when banks come together to install ATM) and white label ATM operators (ATMs installed by individual banks), are already reeling under the financial impact caused by huge losses during and post-demonetisation as cash supply was badly impacted and remained inconsistent for several months.

“The situation has further deteriorated now due to the additional compliance requirements which call for a huge cost outlay. The service providers do not have the financial means to meet such massive cost and may be forced to shut down these ATMs, unless banks step in to bear the load of the additional cost of compliances,” the official added. CATMi said that revenues from providing ATMs as a service are not growing at all due to very low ATM interchange and ever-increasing costs. The confederation estimates an additional outlay of about Rs 3,500 crore, only for complying with the new cash logistics, and cassette swap method. “These requirements were never anticipated by the industry participants at the time of signing contracts with the banks. Many of these agreements were signed four to five years ago when no such requirements were in sight,” he said.

These compliance costs may also see the 15,000-plus white label ATMs going out of business. These operators already have huge accumulated losses and are in no position to bear the additional costs. ATM interchange, the only source of revenue for white label operators, has remained static.

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