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ATM Costs are Part of Overall Bank Costs
The Economic Times, November 26, 2018


The reported warning by the Confederation of ATM Industry that nearly half of the 2,38,000 automated teller machines (ATMs) may shut down by March 2019 due to unviability of their operations cannot be dismissed lightly.

Providing customers access to ATMs is a service of the banking industry. Additional costs associated with the infrastructure needed to make ATM operations secure should be counted as overhead costs that must be defrayed by banks, not the outsourced service providers.

If ATMs do not have cash, customers will need to visit branches, putting more pressure on tellers. Typically, banks spend at least three times more to service their clients for routine transactions. More office space, more tellers, all spell cost.

Rightly, banks are liable for all the associated risks of the cash held with service providers and their sub-contractors. RBI and the ministry of home affairs have stipulated stringent standards for these service providers that include a minimum net worth requirement of Rs 100 crore, minimum fleet size of 300 fully-equipped cash vans, two custodians and two armed guards plus a driver, GPS-CCTV, upgradation of the software and using lockable cassettes in their ATMs to prevent pilferage.

The estimated cost of adhering to the minimum standards is Rs 1,50,000 per ATM per month. That’s not small change. But compromising security is not a solution. Banks do have to recover the extra costs of this infrastructure.

India is a large, underbanked country, and banks must ensure that beneficiaries under the Pradhan Mantri Jan Dhan Yojana who withdraw subsidies in form of cash through ATMs cannot be deprived of the basic benefit. The cost must be spread over the generality of banking services and recovered from them in general, not specifically from ATMs.

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