Cassette-swap: Mechanism to make ATMs better will miss deadline again

Cassette-swap is a lockable mechanism that does away with open cash replenishment. The upgrade is stuck over installation cost

Nearly a year after the rollout for cassette-swaps at ATMs (automated teller machines) was set in motion, it remains largely on paper. The four-phased plan in 30 cities was to cover the entire network of 260,000-odd ATMs in the country by FY24. Another extension – it will be the fourth – may now be sought from Mint Road. The idea of cassette-swaps at ATMs was set in motion six years ago (April 2018) and the first deadline was FY21.

Compared to the personnel of cash-in-transit (CIT) firms loading cash, cassettes-swap is a lockable mechanism. Cash handling is done by CITs at separate centres and loaded into cassettes; and the task of accounting cash in it from the previous replenishment is made simpler.

Banks, CIT firms and managed service providers are yet to break the deadlock over absorbing costs involved in cassette-swap execution. The cost of each cassette ranges between Rs 12,000 and Rs 15,000; and its procurement in large quantities is cited as a burden. The new protocol entails investments as supplementary cassettes will be needed instead of using the same cassette. This may again lead to fresh demands for hiking the inter-change after five free transactions at ATMs from the Rs 17 made in 2022, an upward revision by Rs 2 in over a decade.

When banks sought an extension to March 2024 on cassette swaps, the Reserve Bank of India (RBI) had held a stock-taking meeting with the Cash Logistics Association (CLA). Business Standard has learnt that the RBI “conveyed to banks” that it would have preferred a better ground report. The CLA, on its part, submitted a “confidential update” to the banking regulator, which set up an “internal committee” to monitor developments.

The decision to move over to the cassette-swap model for loading cash in ATM flows from the D K Mohanty Committee on Currency Movement set up in October 2016 to examine risks arising from open-cash replenishment. On April 12, 2018, the central bank asked banks to shift to lockable cassettes in a phased manner covering at least one third of the ATMs such that all machines achieve cassette swap by FY21.

Customers will have to wait for some more time to get better quality notes they pull out from ATMs even as it cuts down on counterfeits, discrepancies in the accounting (of cash) and aligns the country’s cash-moving business with global standards.

At another level, cash is “in” big time. Over the last few years, three firms in this space have got listed on the bourses: CMS, AGS Transact and Radiant – despite the huge increase in digital payments. According to Frost & Sullivan, there’s been a significant increase in demand for cash due to the expansion of non-banking financial companies, e-commerce and other retail enterprises. This has led to a far greater share of cash-on-delivery (CoD). In FY22, CoD made for more than 60 per cent of e-commerce payments; indicating the significance of cash in payments.

A silver lining is that of the installed base of 260,000-odd ATMs, nearly 25-30 per cent are recyclers which not only dispense cash but allow deposits. While recyclers are priced at around Rs 5.50 lakh per unit compared to the Rs 3 lakh for the ubiquitous cash-vending ATM, the bet is that it may reduce the cost of cash loading over time.

ATM cassette-swap: primer on process

• With lockable trays, cash-in-transit (CIT) firms will not have to physically load cash
• Cash handling will be done by CITs at dedicated centres
• Calculating the amount of cash remaining from the last cassette load will be simpler
• System cuts down on fake notes, discrepancies in accounting for cash