Nearly half of the ATMs in India will be rendered commercially unviable because of onerous regulatory requirements, forcing a shutdown, and potentially leading to cash shortage and long queues, similar to the days following demonetisation in 2016. Recent regulatory guidelines for ATM hardware and software upgrades, cash management standards and cash loading methods will render almost 113,000 automated teller machines unviable, the Confederation of ATM Industry (CATMI) said in a statement.
“A large number of ATMs in non-urban locations may be shut down due to unviability of operations. If this happens, the financial inclusion programme would 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 neighbourhood ATM shut,” the CATMI added.
In April, the RBI had mandated a minimum net worth of ₹100 crore for service providers and their sub-contractors handling cash management logistics on behalf of banks. It also directed cash vans transporting money to have CCTVs, GPS connectivity, tubeless tyres, hooters and wireless communication systems. Approximately 100,000 off-site ATMs, and over 15,000 non-bank ATMs could shut down. According to Reserve Bank of India (RBI) data, India had 221,492 ATMs as of September-end.
“The situation has further deteriorated now due to the additional compliance requirements that call 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 compliance.”
According to CATMI, an estimated outlay of about ₹3,500 crore is needed to comply 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 inked four to five years ago,” it said.
The ATM industry in India has reached a “tipping point”, and unless ATM deployers are compensated by banks for making these investments, there is likely to be a scenario where contracts are surrendered, leading to large-scale closure of ATMs, the statement said.
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