Page 49 - Banking Finance October 2022

ARTICLE

innovations like mobile banking, Point Of Sale, E-Wallet and It is gauged that the white-label operators have drained
now may be even CBDC (Central Bank Digital Currency). over Rs 1,000 crore to set up 25,000 ATMs in India, at
an average cost of Rs 5 lakh per ATM. Based on the
location, each ATM may exhaust a running cost of Rs.
Hiccups faced by ATMs in India
30,000 to Rs. 50,000 per month. We may draw that 90-
The economic slowdown, Covid-19 pandemic alongside
100 transactions are required per day to make its
the increased digitization in cities has given another
operations viable and profitable .
blow to the ATM industry that is already stuck in
In 2016 at the time of demonetization we witnessed
unviable operations. Most of the SCBs and independent
ATM operators otherwise also called the white label the stockpiling of Rs 15.31 lakh crore notes that came
ATM operators, have brought down the number of through the deposits by the customers subsequent to
ATMs operated by them. which it was not anticipated that currency in circulation
would knock with such a huge bang that it would reach
The total number of ATMs in India stands at 239,761
an amount of over 28 lakh crore rupees as of March
by end of June 2021, marginally up from 234,357 in
2021. Nevertheless banks are still on the ride of shrinking
March 2020, according to RBI data. The industry has
their ATM base which is adequate enough to exhibit
seen diminutive growth since 2017, following strong
that a huge chunk of this CIC (Cash in circulation) is still
annual growth of 14% between 2012 and 2017. The
outside of the banking industry.
diminishing growth in ATMs is putting a serious strain
In June 2019, the RBI had set up a committee
on the bank customers across the country and they are
spearheaded by V.G. Kannan, the then chief executive
exploring the alternate digital channels.
of Indian Banks' Association, to analyse the interchange
An addition to the miseries was made by the
fee structure. The aim was to stimulate ATM
announcement made by RBI that all such ATMs who go
deployment in the country, especially in the unbanked
out of cash should try and ensure timely replenishment
areas. The committee had also pondered on the issues
to avoid cash outs. "Any non compliance in this regard
involved around the cost effects of regulatory guidelines
shall be viewed seriously and shall attract penalty " .
for enhancing ATM security and control measures.
This came as a jolt and exacerbated the existing wound
Intensified security measures at the ATMs and the
and many banks had planned on shutting down of some
vehicles fetching cash had also impacted the overall
of their ATMs so as to escape such monetary penalties.
economics of ATM deployment.
Though later on this guideline was withdrawn but this
had struck as a lightening.
ATMs in India - an uplift Strategy
There was also a discernible change in the consumer
Further implementing the recommendations of the committee,
behaviour following the pandemic. The majority of the
the RBI on June 10, 2021 hiked the interchange fee on each
population highly reduced their activities at ATMs for the
financial transaction at an ATM to Rs 17 from existing Rs 15.
fear of the COVID virus. A drastic shift to Google Pay,
The ceiling on customer charges was raised to Rs 21 per
PayTm and PhonePe was seen and we witnessed even
the smallest of the hawkers carrying the QR Code along
with them to smoothen out the sales. Then there was
also the long pending issue of revision in the interchange
fee (payment from the card holder's bank to the ATM
owner). Many of the ATM operators especially the white-
label ATM operators decided against deploying new
machines unless and until there was an upward revision
in the interchange fee. Companies were missing out on
their money since the interchange fee was way scant.
Muthoot Finance Ltd and SREI Infrastructure Finance Ltd,
even withdrew themselves from the business as it was
financially unviable. Muthoot had 217 ATMs in March
2020, and none by September 2020.

BANKING FINANCE | OCTOBER | 2022 | 49