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RBI Circular Puts Banks On Sloppy Wicket; Know How

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Kolkata: A Circular was issued by the Reserve Bank of India (RBI) in 2018 with the hope of compliance by the bank by March 2021. But with a lukewarm response from the banks, the central bank of India has no choice but to extend the compliance date till March 2022.

The circular was related to using closed cassettes compatible with different ATM machines. Now, cash is kept in the open boxes inside the ATM machines. Complaints have been raised by a large number of ATM users that machines are dispensing mutilated, coloured, even fake currency notes. Taken to the respective banks, they are not ready to take responsibility and customers are at the receiving end.

To tackle the issue, the RBI has taken a customer-friendly step by issuing a circular regarding the usage of cassettes and in-camera filing of currency notes in those cassettes by MSP’s or agencies tasked with cash replenishment in ATM’s.

From the outset, the banks are putting up their remonstrance against this circular. Their main cause of concern was a huge increase in expenses for ATM maintenance. As per records, the banking industry as a whole may have to incur Rs 6500 crore or more for the introduction of the system.

In addition to the manufacturing of different types of cassettes for different ATMs, banks have to develop new software for adjusting the small amount of cash remaining in the old cassettes when inserting the new cash-filled cassettes in ATMs.

According to the bank’s accounting procedure, when cash is inserted into ATM, money is transferred to the ATM core account. Usually, this ATM core account Is maintained by the bank’s centralised position. So, the remaining money left in the old cassettes of that ATM at the time of changing cassettes has to be deposited to the respective bank’s branch which is in charge of that particular ATM. And, banks have to adjust it with ATM core account via the central office.

On the other hand, Management Service Providers (MSPs) will seek an increase in their remuneration for refilling cash in one ATM as their logistic expenses are bound to shoot up. Information pouring in from different currency-chest branches of large banks who are mainly responsible for handing over cash to different MSPs/cash in transit (CITs), is “Introduction of closed cassettes for ATM’s are few and far between”.

Despite RBI’s extension of the compliance time of the circular for one more year, but that won’t suffice too. In India, with the passage of time, ATM became the most popular channel to provide various services to bank customers.

In the last 21 years — from 1999 To 2020 — ATM network has increased by leaps and bounds. In 1999, only 800 ATMs were in operation in India. And there were only 50 hits per ATM per day on an average then.

Now, India has got more than 213000 ATMs with the average number of withdrawals from ATMs surpassing 750 million a year and the average amount of money involved per withdrawal is Rs 5000.

The increase in the number of ATMs has also raised the number of complaints regarding poor services of ATM systems. One of the major complaints against ATM machines is the non-availability of cash in them. RBI has always taken note of this “cash out” of banks or white level ATMs.

On August 10, the RBI had issued a circular — which would come into effect on October 1 — to banks and white level ATM service providers that Rs 10000 will be imposed as penalty on the banks or white level ATM service providers if their ATMs fail to dispense cash for a period of 10 hours at a stretch.

The circular came as a bolt from the blue for banks as well as CIT agencies or MSPs. Keeping the circular in the mind, if empowered banks or white level ATM operators go for uninterrupted cash availability in 213000 ATMs, they have to bear huge expenses.

It will be quite difficult for banks and CIT agencies to refill cash in all the ATMs within the stipulated time. Also, the cash refilling time for ATMs has been restricted by the appropriate authority. For metro cities or urban ATMs, cash is to be refilled within 8 pm while for semi-urban and rural areas the deadlines are 6 pm and 4 pm, respectively.

With the compliance of the circular, one ATM has to be attended six times a month to refill cash besides the humongous increase in maintenance cost.

Picture credit: ANI

To prevent ‘cash out’ in ATMs, CIT agencies have to arrange for more cash vans, mobile cashiers and guards. Banks Like the State Bank of India (SBI) that has more than 68,000 ATMs all over India are quite worried about shooting up expenses to comply with the circular.

Another factor that will affect the banks is the supply of “ATM-Fit” notes. To prevent ‘cash out’ conditions in ATMs, banks have to arrange for more ATM fit currency notes, a difficult proposition indeed. Post demonetisation, demand for currency notes witnessed a meteoric rise.

As Rs 2000 notes are nearly exhausted and Rs 100 notes are short in supply, only Rs 500 denomination notes are nowadays available in ATMs. It creates two difficulties — one is customers can’t withdraw any amount which is below 500 or amount divisible by 500 while the other being the non-availability of higher denomination of notes like Rs 2000. These factors are a huge worry for the CIT agencies to carry the cash to ATMs. Banks are trying to shift the responsibility of ‘cash out’ to CIT agencies or MSP agencies.

But MSPs/CITs are not keen on giving enough importance to the RBI circular until and unless the banks or white level ATM service providers give them some pecuniary benefits. So, banks will find it difficult to comply with the circular of ‘cash out’ proposition in the near future.

Indian banking industry with a burden of nonperforming assets to the tune of Rs 8.34 trillion might not be in a position to incur these expenses immediately for improved services of ATMs.

This can have an effect on the customers. The banks might go for the only alternative — to reduce the number of ATMs just to comply with the circular from the “Banker’s Bank”.

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