Stiff cashout penalties may lead to shutdowns, ATM companies tell RBI

MUMBAI: The ATM industry has made a representation to the Reserve Bank of India (RBI), seeking a retraction of the Rs 10,000 penalty for cashout at any machine for over 10 hours. According to a presentation by the Confederation of ATM Industry (CATMI), far-flung machines will have to be shut down as it is not possible to ensure cash availability around the clock. In a presentation that was shared with the media, CATMI said that the norms would mean that 70-80% of semi-urban & rural ATMs and 20-30% of urban ATMs would be liable for the Rs 10,000 penalty and the likely penalty on operators would be Rs 80-100 crore per month. The confederation has said that there are only two-three major cash-replenishment agencies in the country and they are unable to service small towns and villages with the desired frequency. Moreover, 8-10 hour power outages in many semi-urban and rural areas disrupt cash loading. Currently, around 42% of rural ATMs are loaded only once a week while 20% are loaded twice every week. The rest are loaded with cash on alternate days. “If implemented, the current scheme will force bans, white-label ATM operators (WLTAO), management service providers to shut down all far-flung ATMs which are difficult to operate. WLAOs, who are currently rolling out 600-700 ATMs per month in the interiors of the country, will be forced to stall/curtail or close operations,” the confederation said. CATMI added that closure of ATMs in areas that need them for the distribution of subsidies and benefits will mean serious inconvenience to the under-served segments of the society and will impact financial inclusion. It said that banks have already started introducing contractual penalty clauses with management service providers (or MSPs, the companies that manage ATM networks on behalf of banks for a fee). In a request for proposals, a large public sector bank has said that the MSP will face a cashout penalty of Rs 1,000 if there is no cash for 4-8 hours, Rs 2,000 (for up to 24 hours) and Rs 4,000 for more than 24-hour cashout situations. “For white-label ATM operators and MSPs with low transaction volumes at around 80-90 per day, this penalty is 25-30% of the revenue. With such huge penalties, both MSPs/WLAO model will become defunct. Cumulatively, all WLAOs earn around Rs 90 crore per month and this levy will be Rs 25-30 crore per month,” the confederation said.

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