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RBI asks banks to speed up ATM upgrades as deadline looms large


MUMBAI: Indian banks are staring at penalties over missed deadlines on compliance with ATM security and cash management norms introduced by the Reserve Bank of India over the last two years which banks say is not remunerative enough to carry out due to meddling in the fee structure.

Most banks have not initiated these upgrades as sought by the central bank as their cost analysis of such an overhaul is significantly higher than central bank’s estimates, said people aware of the matter.

The norms in question include revamp of outdated cash-replenishment process with a new cassette swapping system, ramping electronic surveillance at ATM premises, installing digital locks and upgrading the Operating Systems powering these cash machines.

“Most acquirer banks who operate ATMs are waiting for a hike in interchange rates or some compensation mechanism to cover for these costs,” said a person aware of the matter. “At present less than 5% of ATMs would have been upgraded.”

The central bank had issued these guidelines in a slew of circulars over 2018 and 2019 in the expectation that banks would reorient their processes in a phased manner. With most ATMs still running on outdated processes, banks are now being asked for updates by the banking regulator, people cited above said.

“We are already in talks with our ATM providers for upgrades…it’s a cost they are bearing for now. We have also received a communication from the regulator to hasten the process and it is now being done on priority,” said a banker who did not want to be identified.

Queries sent to RBI didn’t elicit a response till press time.

However, some banks pointed out that the ATM business for most lenders, especially on the acquirer side is turning into a less lucrative due to mounting costs and stagnant revenues.

An RBI constituted committee headed by Indian Banks’ Association chief V G Kannan, also makes note of this in their recommendation submitted to the central bank earlier this year.

“If Cassette Swap model has to be mandatorily implemented it will raise the cost of total expenses and indirectly impact the interchange and customer fees, by about 15%,” says the report reviewed by ET.

RBI’s calculations show that it would cost the industry about Rs. 160 crores to revamp ATM cassettes, details procured by Srikanth L of Cashless Consumer — a consumer collective – through Right To Information Act shows. But the banking industry’s assessment presented to the committee puts these costs at Rs.3000 crore.

The committee has recommended RBI to introduce a population-based pricing mechanism for interchange hiking to rates from Rs.18 in towns with more than 1 million population and Rs.17 elsewhere from the current Rs.15.

Meanwhile ATM operators told ET that several banks are now approaching them to update some of the processes.

Some banks include HDFC Bank, Axis Bank, ICICI Bank are learnt to have upgraded e-surveillance at on-site ATMs whereas, and others such as Federal Bank, Uco Bank, Punjab and Sind Bank, J&K Bank and Cosmos Bank are in the process of upgrading.


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