Automated teller machine (ATM) service providers have threatened to close down almost 1.13 lakh ATMs — almost half of the total ATMs across the country — by March 2019 citing unviability in their operations.
These numbers include approximately one lakh off-site ATMs and over 15,000 white label ATMs. Currently, the country has approximately 2,38,000 installed ATMs, as per the latest publicly available figures. The forced closure is on account of unviability of operations brought about by recent regulatory guidelines for ATMs hardware and software upgrades, recent mandates on cash management standards and the cassette swap method of loading cash, industry officials said.
“A large number of ATMs in non-urban locations may be shut down due to unviability of operations. If this happens, the financial inclusion programme would be severely impacted as millions of beneficiaries under the government’s Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, who withdraw subsidies in form of cash through ATMs, may find their neighborhood ATM shut,” said the Confederation of ATM Industry (CATMi). This may result in long queues and chaos similar to what the country witnessed when ATMs were not dispensing cash, post demonetisation, it said.
Several hundred thousand jobs ride on this industry and as per CATMI estimates, the closure of ATMs may result in considerable job losses that would be detrimental to financial services in the economy as a whole. ATM service providers, which include the ATM managed service providers (MSPs), brown-label ATM deployers (BLAs) and White Label ATM Operators (WLAOs), 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, it said.
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.
The association said that revenues from providing ATMs as a service are not growing at all due to very low ATM interchange and ever-increasing costs. An additional outlay of about Rs 3,500 crore — only for complying with the new cash logistics and cassette swap method — will be required. These requirements were never anticipated by the industry participants at the time of signing contracts with the banks. 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 and are in no position to bear additional costs. ATM interchange, the only source of revenue for WLAOs, has remained static despite frantic pleas to increase the rates,” said an ATM service provider.