ATM body protests RBI's penalty rule if found with no cash, seeks review

MHA norms restrict cash movement in rural, semi-urban areas, which will hinder cash distribution, says an official of the Confederation of ATM Industry

Shocked by the latest decision of Reserve Bank of India (RBI) to impose penalty on banks if an automated teller machine (ATM) runs out of cash for more than ten hours in a month, the Confederation of ATM Industry (CATMi) has protested the decision and sought a review of the rule.

In a direction issued to banks on Tuesday, the banking regulator said from October 1, banks will face a penalty of Rs 10,000 per ATM if found without cash for more than ten hours in a month. CATMi has now sent a communication to the banking regulator protesting the move and requested for a review of the penalty decision.

“In case of White Label ATMs (WLAs), the penalty would be charged to the bank which is meeting the cash requirement of that particular WLA. The bank, may, at its discretion, recover the penalty from the WLA operator,” RBI said.

“I don’t think this move will serve the interest of the industry or the banks,” said a CATMi board member.  “It is detrimental for the growth of the industry. When you are looking at such a strict penalty … when you do not earn that much, and you are going to get penalised, the viability of deploying ATMs, for banks as well as WLAs, will be impacted,” the official told Business Standard.

According to CATMi, ground realities were not taken into account before formulating the decision.

“There are various challenges faced by the industry today. In some pockets cash availability is an issue as it is now available in the denomination we want. Rs 2,000 denomination is not readily available. Storage and vaulting facility not available everywhere,” the official said. The unavailability of Rs 2,000 note means the ATM will only have lower denomination notes, so chances that the machine will run out of cash sooner becomes higher.

One of the significant challenges faced by the service providers are restrictions on cash movement in rural and semi-urban areas after a particular time.

“Ministry of Home Affairs [MHA] restricts cash movement after 6 pm in semi-urban areas, after 4 pm in rural areas,” the official said.

“By the time we get the cash from the bank, it is almost 12 o’ clock in the afternoon. By the time the cash gets distributed it is 4.30-5 for the CIT [cash in transit companies]. Then there are home ministry norms on cash movement. If you put these kinds of restrictions, even if you have cash, you cannot load cash,” the person said.

In addition, overnight vaulting facility is not available, which means if a CIT is left with excess cash, then they have to go back to the bank and deposit it in the vault. Because CITs are not allowed to keep the cash with them.

“You don’t have too many CITs. They do not offer services in deep rural areas,” the official said.

CATMi officials said they were surprised that there was no consultation with the industry players before the decision was announced. 

“We were not considered, we were not called in, there were no discussions. This unilateral decision has come as a rude surprise to us… We are sending out a protest note for a review of this direction to RBI,” the CATMi board member said.

“We are not against the move. ATMs should have cash and consumers should get cash when they go to the ATM. But you need to be cognizant of the ground realities. You need to get all the market participants involved. All the players in the ecosystem, banks, CITs, MSPs should be heard,” the person said.

The RBI said the penalty will be levied on the banks, but the reality is 60-70% of the ATM fleet is managed by outsourced companies. At the end of June, there were 213,766 ATMs in the country.