The number of debit cards in India has doubled to 94 crore in February this year from 42 crore in August 2014 when Jan-Dhan Yojana was launched. However, the number of ATMs has increased only 20% from 1.70 to 2.02 lakh, and a stand-off between banks, ATM companies and cash logistics firms on sharing costs are holding back investments. While cash in circulation has jumped to Rs 21.36 lakh crore, the ATM network of banks has shrunk from 2.06 lakh a year ago to 2.02 lakh this year. At the heart of the stand-off is the question of who will bear the additional costs over the RBI’s new security guidelines for ATMs. While a large public sector bank did float a procurement process for new machines, the transaction did not materialise as there was no consensus on who will bear the increased costs. Last year, the RBI came out with a new set of guidelines requiring banks to ensure that the cash vans they use have multiple security features including GPS and armed guards. It has also placed limits on the extent of cash that can be carried in the vans.
Significantly, it has asked banks to switch to a ‘cassette swap’ system where currency notes will be transported in metal canisters, which will be loaded directly into ATMs and the cash loaders will not have access to currency notes. Banks must upgrade a third of their network every year and cover all machines by March 2021. “We are seeing ATM deployment only in pockets. Clearly, the demand is there. It is about creating a model that is viable. If the additional costs are not covered through a higher interchange (a fee paid by the ATM-using bank to the ATM-deploying bank), banks will have to bear the costs,” said Himanshu Pujara, regional MD of Euronet Worldwide and a director in the Confederation of ATM Industry (CATMi). With banks outsourcing deployment of ATMs, management service providers who operate the networks or even rent out machines to banks have a large role to play. Banks, which are trying to contain costs, are refusing to pay more for the same services. The cash logistics companies are seeking an additional Rs 4,900 per ATM per month because of the increased security features.
“The increased costs are a disincentive for ATM deployment. Although the RBI has issued several new bank licences, many of them are looking at riding the network of existing banks as paying the interchange is cheaper than building your own network,” said a banker. The interchange issue is being addressed by the RBI and a recent meeting was called by National Payments Corporation of India (NPCI) and the interchange is likely to be increased from Rs 15 to Rs 18 per transaction.