Yes, ATMs are closing! No, half the country's ATMs won't close

The Confederation of ATM Industry (CATMi), an umbrella body that operates a vast network of ATMs across India, has said it will rather shut down nearly 50 per cent ATMs operational across India than bear the massive cost it will incur in complying with the new ATM management guidelines.

Operators claim maintaining ATMs is already a costly business. From rents to computer maintenance and generator cost, the expenses are big. But earnings are not, they rue.

ATM service providers say they worked as a task force of the government after demonetisation but they will not be able to do the same this time if banks don't step in to bear the added cost.

"The compliance starts from February 9, as per the MHA guidelines. If we have to comply with the guideline, banks need to respond faster. The idea (warning the closure of ATMs) is to help the RBI and banks to quickly move forward and find a solution," says CATMi Director V Balasubramanian.

What are the new guidelines?

The entire ATM business climate changed on April 6 this year when the RBI laid down new guidelines for banks on ATM management. The new rules mandate:

• The ATM service providers need to maintain at least Rs 100 crore all the time.
• They should have a fleet of at least 300 specifically fabricated cash vans (owned or leased).
• They should be equipped with CCTV cameras and GPS, wireless communication, and hooters.
• Two custodians and two armed security guards should always man the cash van.
• The ATM operators must use lockable cassettes in their ATMs which need to be swapped at the time of cash replenishment.

The RBI gave the banks 90 days to implement these measures. But, on June 21, the central bank made further additions to list. It asked banks to ensure the computer systems in ATMs were BIOS password protected and carried supported versions of the operating system.

To make matters worse for the operators, the Ministry of Home Affairs in August released a notification after a series of incidents related to the attacks on cash vans and ATM frauds. As per the notification, no cash loading of the ATMs or cash transportation activities could be done after 9 pm in urban areas, after 6 pm in rural areas and before 9 am or after 4 pm in the districts notified by the Centre as Left Wing Extremism affected areas.

Like the RBI, the Centre also mandated each cash van should carry at least two armed security guards, two ATM officers or custodians, excluding drivers. Operators were asked to install all the necessary equipment to ensure the security of the cash vans.

How expensive does this get for ATM operators?

According to the operators, applying these guidelines across ATMs in India will require a lot of money. Though service providers already comply with many of these new rules, they say following all the new norms could raise the cost by at least Rs 5,000 crore. CATMi has said they require Rs 3,500 crore alone to comply with cash logistics and cassette swap method.

Balasubramanian says these new guidelines will raise the overall cost by over 40 per cent. According to Balasubramanian, banks want to keep their profits up by asking the service providers to bear the cost.

He also said that the operators needs some co-operation from the RBI and want to rollout the guidelines in a phased manner. "We sent a presentation to the RBI, saying we will take cassette swap project on a pilot basis, maybe in a district. Let every bank join the pilot project, and implement and understand the challenges before we deploy across the country," he said.

Is closing ATMs a real option?

Unlikely. While the industry body may threaten closure of ATMs, it's unlikely the government will let such a situation prevail before the general elections. Closing half the ATMs in the country would mean another demonetisation-like situation where people struggle to get hold of cash.

Moreover, recent data suggests people continue to depend on withdrawing cash, instead of making digital transactions. "Transactions have increased tremendously for ATMs. So if you compare pre-demonetisation period to now, it has gone up several times," added Balasubramanian.

To conclude, even though half the ATMs in the country may not close, high maintenance cost has resulted in a marginal drop in the ATM network in the country. As per the RBI data, in August 2017, there were 2.08 lakh ATMs in India. After a year in August 2018, the number was 2.05 lakh.

Also read: PNB assures no plans to reduce ATMs; will not increase usage charges