50% Of India’s ATMS May Be Closed After Hundred Of Crores Spent On Recalibration

After demonetisation, in order to distribute the newly issued Rs 500 and Rs 2,000 notes, several 2.4 lakh ATMs in India were recalibrated.

Shortly after that, to dispense the brand new Rs 200 denomination banknotes, the ATMs needed to be recalibrated again. Even before this recalibration was finished, the government then introduced the new Rs 100 notes, with 66mm x 142mm dimension, which is different from the 157mm x 73mm dimension of current notes. This meant that these ATMs are called for recalibration once more time. When the new Rs 100 banknotes were first introduced in July, banking industry insiders had pointed out that this would cost several Rs 100 crore and almost a year for the ATMs to be recalibrated to be able to dispense new banknotes.

Industry insiders also said that it would cost more for banks and ATM service providers to recalibrate ATMs. To be suitable for new currency, it will cost each ATM about Rs 3,000. And after all these costs and recalibration, out of 2.38 lakh ATMs in total, several 1.3 lakh ones are closing down.

Due to changes in legal issues, it is difficult to operate ATMs and may result in the shutdown of 50% of the 2.38 lakh machines across the country by March 2019, reported by the Confederation of ATM Industry (CATMI). Industry insider said: “By March 2019, service providers may be pushed to shutdown nearly 1.13 lakh ATMs in the country including roughly one lakh off-site ATMs and a bit more than 15,000 white label ATMs,”

Recent administrative changes which includes those on software and hardware improvements, together with the cassette swapping method and authorization on cash management policy, will prove ATM operations improbable and lead to shutdown. The industry will lost approximately Rs, 3000 crore due to cassette swapping process and new cash logistics. The ATM industry consisting of managed service providers, white label ATM operators (WLAO) and brown-label ATM deployers, is still stunned by the demonetisation shock.

Because additional agreement requirements require a huge cost, the situation worsens. Such enormous cost cannot be met when service providers do not have any financial means. This means that these ATMs might need to be closed. According to insider, the one and only way to save the situation is only if banks “step in and take on the additional cost of the requirements”. It also said that: “There is a possibility that contracts are surrendered unless banks decided to compensate ATM deployers. If this happens, it will lead to the shutdown of ATMs on a large scale,”

For CATMI, the majority of ATMs to be shutdown will be in areas that are out of urban zone and are still using mostly cash. The shutdown of ATMs will have a drastic effect on the job market and the government financial inclusion intention.