A higher interchange is critical for ATM biz: India1 MD & CEO K Srinivas

A decade after white-label ATM operators (WLAOs) came into play, only a shade more than 30,000 units have been set up by them. The country’s largest WLAO, India1, with a tad over 13,000 units, feels it can double deployments by FY28. 

K SRINIVAS, managing director and chief executive officer of India1, spoke with Raghu Mohan over the phone. Edited excerpts:

Why do we still lag on ATM density despite a WLAO policy to address the issue?

At 260,000 ATMS, our average penetration level is way below (compared to the rest of the world). We are currently at about 21 ATMs per lakh population compared to 129 in the US, 117 in Japan; China and Brazil are at 81 and 97. In the semi-urban and rural (SURU) areas, there are only about 13.3 ATMs per lakh population. In the last six years, WLAOs have done the heavy lifting, deploying more than 55 per cent of ATMs. In SURU areas, we account for two-thirds of all deployments.

While UPI (Unified Payments Interface) is growing rapidly, in the last five years, the currency in circulation has also been growing at over 10 per cent per annum. The total number of people who have ever used UPI is approximately 300-odd million and of this, 100 million make up for almost 80-90 per cent of the usage. With direct benefit transfers, you need to have enough cash-out points for its beneficiaries. We need at least 350,000 ATMs by FY28. Now, why is this not happening at the pace required? It’s because of the current cost structure: Unless you do around 120 transactions per ATM per day, it’s not going to be viable.

Should the white-label ATM (WLATM) policy be revisited?

The Reserve Bank of India (RBI) did away with the original licence conditions about a year ago. However, what they have asked us to do is that at any given point of time – whatever be the number of ATMs – it has to be in the 1:2:3 ratio (metro/urban: semi-urban: rural. Earlier, the licence condition deployment obligation was one lakh ATMs per calendar year. The RBI has also made WLATM licenses on-tap. It’s likely that a few more players will participate which will add momentum to the industry.

Cassette-swap for ATMs has not rolled out the way it was imagined. We are very much still with open-cash replenishment

As one steps out of the metros and Tier-I cities, the overall cash infrastructure is very weak. The ecosystem to implement cassette-swap is not present in SURU areas. The interchange committee set up in 2019 had recommended that it be pegged higher. Even back then, the cost per transaction was way more than the interchange. WLAOs have to borrow from a bank and then load the cash into ATMs. Then you have inflationary pressures, be it on fuel or ATMs (unit price). We have made representations to the RBI and recommended a higher interchange. We have been assured that this will be looked at. We are dependent on private equity investments. There has to be a reasonable return on investment; and it does not have to be obscene like 10x or 20x.

The big picture is that it’s misplaced to view cash-versus-digital as a binary. 

Given the issues affecting the industry, can you give India1’s outlook on the near term?

We recently celebrated our 10th anniversary and are now the country’s largest WLAO. In the recent past, WLAOs have deployed more ATMs than banks. However, given that the operational costs are higher than the interchange, deployments by us are in the negative for the last financial year. We have made several representations to the RBI to hike the interchange to provide relief to the industry. It will lead to higher deployments, especially in the SURU areas.

We foresee that the ATMs deployed will cross 350,000 by FY28; India1 will double its numbers to cross 25,000 units.