Banks may slow ATM expansion, encourage online transactions, BFSI News, ET BFSI

The new Reserve Bank of India rule to penalise banks Rs 10,000 for each instance of an ATM out of cash for 10 hours has an unintended fallout in the form of banks slowing down the rollout of ATMs.

According to experts, banks may rely on other banks ATMs if there are more restrictions rather than setting up new ones. With digital channels picking up banks would go slow on ATMs.

The directive may cost banks Rs 125-200 crore, according to estimates by ATM operators and cash logistics companies.

In a circular to banks, the RBI said that they should monitor the availability of cash in ATMs and ensure that there are no cash-outs. The circular said that banks would be fined Rs 10,000 if there is a cash-out at any ATM for more than 10 hours in a month.

The issue

There are 2,13,766 ATMs in the country, and most of them are managed by MSPs who appoint cash-in-transit companies to replenish the currency notes in the machines.

An ATM typically goes out of cash six times every month and nearly 50% of the ATMs face this issue. The biggest hit will be to State Bank of India which has about 64,000 ATMs.

However, there are certain locations where ATMs run out of cash within hours of being loaded. These machines may not become feasible to operate if there is a penalty every month.

The reaction

There is a mixed reaction to the move by the RBI to penalise banks Rs 10,000 for each instance of an ATM being out of cash for 10 hours. ATM operators (known in the industry as managed service providers, or MSPs) and cash-in-transit companies are throwing up their hands, stating that they will not bear the penalty.

However, it is quite likely that the banks may pass the penalty to MSPs, which will in turn pass it on to cash logistics agencies.

Experts stress the need to address the root causes of ATMs running dry, such as sub-optimal cash forecasting and delays in the availability of ATM-fit currency.

The RBI circular

Already banks are struggling to meet the 2018 RBI circular that requires banks to put in place stringent measures such as transporting cash in cassettes, in prescribed vehicles sticking to government norms on the transport of currency during specified hours of the day. According to banks, it is difficult to implement all these norms under present cost structures.