New Delhi: About 50% of the ATMs in the country will become commercially unviable because of changes in the regulatory requirements. The new regulations may lead to the closure of early half of the total 2.38 lakh ATMs in the country by March 2019, report citing Confederation of ATM Industry (CATMi).
The closure of this many ATMs will not only impact thousands of jobs and the financial inclusion efforts of the government but can also lead to cash shortage and long queues at ATMs just like during demonetisation in 2017. The report quoted CATMi saying in their statement, “Service providers may be forced to close down almost 1.13 lakh ATMs across the country by March 2019. These numbers include approximately one lakh off-site ATMs and a little over 15,000 white label ATMs”.
CATMi further said that the industry has reached a “tipping point”. Most of the ATMs which might be shut down will be in the non-urban areas which can impact the financial inclusion efforts since the beneficiaries use the ATMs to withdraw their government subsidies, the report further added. The industry body mentioned that recent regulatory changes, both hardware as well as software upgrades, coupled with mandates on cash management standards and the cassette swap method of loading cash, will make 50% of the ATMs operations unviable and this will lead to closure.
It may be noted that the new cash logistics and cassette swap method alone will result in costs of Rs 3,000 crore for the industry, the news agency report stated. CATMi statement also said that the ATM industry, including managed service providers, brown-label ATM deployers as well as white label ATM operators (WLAO), are still not over the demonetisation shock of 2017.
The agency further quoted the industry body saying, “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.” According to the body, the only solution to this problem is if banks “step in to bear the load of the additional cost of compliances”.
If ATM deployers are not compensated by banks for making these investments, the deployers are likely to surrender the contracts which might lead to the closure of ATMs on a large scale.
Worth mentioning here is that the revenues for providing ATMs services are not growing at all due because of extremely low ATM interchange charges and increasing costs. These changes are not anticipated when deployers sign the contracts with banks. The statement also revealed about 15,000 ATMs run by WLAOs can be shut down as they have accumulated losses.
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