Half of India’s ATMs may close down by March 2019

Bengaluru: Just 2.38 lakh ATMs for a country of 1.3 billion! If that’s bad enough, here comes the worst. Over 50 per cent of the ATMs are going to shut down by March 2019. The worst impacted of the closures will be millions of rural poor.

The Confederation of ATM Industry (CATMi), the apex body of the domestic ATM industry, said on Tuesday that service providers may be forced to close down almost 1.13 lakh ATMs across the country by March next year. These numbers include some 100,000 off-site ATMs and over 15,000 white label ATMs. A large number of ATMs in non-urban locations may also be part of the shut down, said a CATMi communiqué. The industry has reached a “tipping point,” the body added.

“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,” said V Balasubramaniian, director, CATMi.

The en-mass ATMs closure may throw the Union government’s pro-poor financial inclusion programme out of gear. That means, millions of rural poor and beneficiaries of Pradhan Mantri Jan Dhan Yojana (PMJDY), who withdraw subsidies as cash through ATMs, may soon find their neighbourhood money machines dead or missing.

The closure of ATMs may also result in considerable job losses that would be detrimental to financial services in the economy as a whole, cautioned CATMi. It is also likely to lead to long queues and chaos similar to what the country had witnessed when ATMs were not dispensing cash post demonetisation.

CATMi said its members, 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.

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, said CATMi.

The body added that revenues from providing ATMs as a service are not growing at all due to very low ATM interchange and ever-increasing operational costs. CATMi estimates an additional outlay of about Rs 3,500 crore only for complying with the new cash logistics and cassette swap method. 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.

The ATM industry in India has reached a tipping point, and unless ATM deployers are compensated by banks for making these investments, there is likely to be a scenario where contracts are surrendered, leading to large scale closure of ATMs, the apex body further added.