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    ATMs Won't Shut Down But Withdrawing Cash Could Get Expensive

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    Back in December, the ATM industry said that they would shut down nearly 50 percent of the ATMs in the country by March 2019 as maintaining them was not profitable with an increase in operational costs on complying with RBI's additional rules.

    While the data regarding ATMs for the month of March is not out yet, a LiveMint report suggests that the possibility of a drastic reduction in the number of ATMs is unlikely but the fees charged by the companies on cash withdrawals could increase.

    ATMs Won't Shut Down But Withdrawing Cash Could Get Expensive
     

    In India, ATMs are deployed using three models. The first is where the banks deploy the machines, secondly, there are ATM companies that manage these services on behalf of banks and a third model for small cities.

    In June last year, the RBI had ordered implementation of a host of tight security measures related to the machines. These measures included updating the software, providing certain security parameters to the cash van and the machine's cash holding slots.

    These updates were required to be implemented by March 2019 and the changes would mean incurring additional costs.

    Considering the fact that the ATM companies are presently facing a fall in profitability following the demonetization, the increased operating expense became burdensome and there was no consensus as to would bear the costs (ATM companies or banks).

    The LiveMint report citing a regional managing director of an ATM company said that the NPCI has spoken to the Ministry of Finance to revise the interchange fee (the cost charged by the ATM companies per transaction) and made certain recommendations.

    While at this point we have to wait for the negotiations results to come, the ATM companies are hoping that banks reimburse the increased costs so that they can, in turn, pay the cash loading agencies.

    The interchange fee is estimated to rise by 10 to 15 percent. This means that while customers need not worry about a fall in the number of ATMs, if the decision to pass on the burden of the interchange fee to the customers is taken, cash withdrawals could get more expensive.

    Read more about: atm cash
    Story first published: Saturday, April 13, 2019, 11:44 [IST]
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