India may lose half of its existing ATMs by March 2019

Soon, you may have to walk longer to find an ATM. A large number of ATMs may be shut down due to higher costs because of new regulatory guidelines, claims the Confederation of ATM Industry.

On November 21, the Confederation of ATM Industry (CATMi), the apex body of the domestic ATM industry, released a statement that said that service providers may be forced to close down almost 1.13 lakh ATMs across the country by March 2019. These numbers include approximately one lakh off-site outlets and a little over 15,000 white label ATMs.

Currently, India has approximately 2,38,000 installed ATMs, as per the latest publicly available figures. CATMi said that the forced closure is on account of unviability of operations brought about by recent regulatory guidelines for hardware and software upgrades, recent mandates on cash management standards and the Cassette Swap method of loading cash.

The industry body also said that 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.

"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 neighbourhood ATM shut", said CATMi.

This may result in long queues and chaos similar to what was witnessed when machines were not dispensing cash post demonetisation.

Also read: [2 years of demonetisation] 5 trends that defined India’s digital payments industry since 

Several hundred thousand jobs ride on this industry, and CATMI estimates that this move may result in considerable job losses detrimental to financial services in the economy as a whole.

The situation has further deteriorated due to the additional compliance requirements that call for a huge cost outlay. Service providers do not have these financial means and may be forced to shut down many machines unless banks step in to bear the additional compliance costs.

CATMi added that revenues from providing ATMs as a service are not growing at all due to very low ATM interchange and ever-increasing costs. The industry body estimated 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 that were mostly signed 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.