Half of India's ATMs to close by March 2019

New Delhi: Some 50 per cent of existing ATMs may shut down across India by March 2019 due to unviability of operations after recent regulatory changes, said the Confederation of ATM Industry (CATMi) on Wednesday.

“Currently, India has approximately 2,38,000 ATMs, of which around 1,13,000 ATMs including around one lakh off-site and around 15,000 white label ATMs are expected to down their shutters,” said a CATMi spokesperson.

While off-site ATMs are set up on a standalone basis and are not on the premises of a bank, white label ATMs are set up, owned and operated by non-bank entities. 

CATMi said its members will have to spend additional '3,500 crore only for complying with the new cash logistics and cassette swap method at a time when revenue from providing ATM service is not growing. It said that these requirements were never anticipated by the industry participants at the time of signing contracts with the banks 4-5 years back. 

The RBI has asked banks to use lockable cassettes instead of open cash replenishment or top-up method. The RBI had also said that “cash logistic companies”, that take cash around the country must increase their net worth to '100 crore within 90 days. Also, the Central Bank had said that cash must be transported only in four-wheelers that have tubeless tyres and multiple armed guards to vend it.

CATMi said that a large number of ATMs in non-urban locations may be shut down due to unviability of operations. 

“Beneficiaries under the government’s Pradhan Mantri Jan Dhan Yojana scheme, who withdraw subsidies in form of cash through ATMs, will be hit,” it said. This, CATMi said may result in long queues similar to what the country witnessed post- demonetisation.

CATMi said the ATM operations have become unviable after recent regulatory guidelines for ATMs hardware and software upgrades, recent mandates on cash management standards and the ‘cassette swap’ method of loading cash. 

CATMi said that its members are already reeling under the financial impact caused by huge losses during and post-demonetisation as cash supply was impacted and remained inconsistent for months.

“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 compliances,” it said.

CATMi added that revenues from providing ATMs as a service are not growing at all due to very low ATM interchange and ever-increasing costs. 

“CATMi estimates an additional outlay of about '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,” it said.

CATMi said that many of these agreements were inked four to five years ago when no such requirements were in sight.

“These compliance costs may also see the 15,000-plus white label ATMs going out of business. WLA operators already have huge accumulated losses,” the industry body said.