Half of ATMs may shut by March on stricter regulatory norms

Banking may no longer be at your fingertips as half of India’s ATM (Any Time Money) machines may down shutters by March 2019 as regulatory guidelines for safer transport and storage of cash will make the business expensive.

There are 238,000 ATMs in the country, a number that has remained static for the last two years with most banks clamping down on the expansion due to higher operational costs. Banks are also encouraging customers to migrate to internet banking where the operational costs are significantly lower.

Closure of 1.13 lakh ATMs across the country by March 2019 will impact thousands of jobs and also the financial inclusion efforts of the government, warned the Confederation of ATM industry (CATMi), the apex body of the domestic ATM industry.

The revised guidelines on the movement and storage of cash, issued by the Ministry of Home Affairs (MHA), will make it unviable to operate ATMs unless banks increase service charges. ATM service providers and cash logistics companies warn that they will find it financially difficult to comply with the revised regulatory guidelines and may have to close down 50% of ATM machines across India by March 2019. These will include around 100,000 off-site ATMs and a little over 15,000 white label (bank agnostic) ATMs.

The new security measures will have to be put in place by the ATM service providers and the cash logistics companies by February 2019. It will also call for re-working of their contracts with banks.

“We are staring at a two-month window to comply with the new regulations. It will be impossible for us to do so. Even when we signed our agreements with banks, these security features were not in force. This calls for re-working of our contracts with the banks. Many of these agreements were inked four to five years ago when no such requirements were in sight,” said V Balasubramanian, director of CATMi.

The revised guidelines, which became part of the government gazette in August, insist on tighter security norms for cash movement. These include hardware and software upgrades, new cash management standards and the cassette swap method of loading cash. For refilling of the cash in the ATMs, the companies now need to have two cassettes (sachet in which cash sits in an ATM). A pre-filled cassette should be taken to the ATM (rather than taking the cash and refilling the cassette). There should be two gunmen in the van (instead of one) which moves the cash. The van needs to have camera and other infrastructure facilities so that the movement of cash can be monitored. The circular has also specified the thickness of the cash storage vaults.

“All these measures will require huge investments. CATMi would require an additional outlay of Rs 3,500 crore to implement the cassette swap alone,” said Balasubramanian.

Unless banks step in to bear the load of the additional cost to meet these compliances, the ATM deployers do not have the financial means to make these investments and there is likely to be a scenario where contracts are surrendered, leading to large scale closure of ATMs.

“To implement all these security, software-hardware directives would entail a minimum additional investment of Rs 150,000 per ATM per month. For all the 238,000 ATMs in the country, the investment requirement would be huge,” said Balasubramanian.

Revenue from providing ATMs as a service is not growing at all due to very low ATM interchange and ever-increasing costs, CATMi said in a statement.

The ATM explosion in recent years has led to a new banking culture. With 8.9 ATMs per 100,000 population, India’s ATM penetration is one of the lowest globally.