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Closure of about 50% of ATMs will create significant problems — Part I

According to the ATM Industry Organisation “Confederation of ATM Industries”, due to cost burden, which is to be increasing owing to ATM inter-duty charge and the new regulatory rules whereby updating of the hardware and software of ATM, will be done of over 1 lakh ATMs and more than 15,000 White-Label ATMs, otherwise these may be closed by March 2019. This number is approximately half of the total 2.38 Lakhs ATMs installed across the country. It is noteworthy that after printing, a large number of new notes, whose length, width and thickness were not compatible with existing ATMs, a large number of ATMs became either useless or compatible only for 100 hundred notes. In such a case, to make ATMs fit for the size of the new notes, there is a need to make changes in hardware and software, which costs too much for banks.  

It is proposed to impose Rs 15 as an inter-duty charge on every transaction made from ATM. the According to an estimate, the new regulation will increase the burden of about 35 billion rupees on the ATM industry. Most damage is likely to be on White Label ATM service providers because ATM Inter-duty charge is the main source of their income. In such circumstances, the closure of such ATMs is almost certain.

However, the Indian Banks’ Association has urged the Reserve Bank of India to relax the rules, but the Reserve Bank is not in the mood to provide relief at this time. It is important that the Reserve Bank is required to charge the ATM transaction or to make various compliance requirements for the ATM. According to KATMI, ATM service providers do not have so many resources that they can afford additional expenses. However, in the changing environment, many banks across the country and ATM machines at the rental companies have started work on closing the ATM.


A little bit relief

State Bank of India (SBI) says that the bank has to adhere to new regulatory requirements. Bank has two types of ATMs, one is related to them, which will be updated and the other is related to the vendor’s ATMs, which will be updated with consultation with them. There is no plan to reduce the number of ATMs by Punjab National Bank (PNB) till March 2019. It seems that the situation is not likely to worsen due to be the positive attitude of these two major banks. The PNB has 9,428 ATMs across the country, while SBI has more than 59,541 ATMs till March 31, 2018.


Difficulties with ATM shutdown

The shutdown of ATMs can lead to loss of jobs because thousands of people are dependent on the ATM industry for employment. As we know, the spread of ATM in the remote area of the country is very important for financial inclusion. Therefore, the concept of 100 per cent financial inclusion of the government could be incomplete due to half the ATM closure. Today, people in the town and rural areas have become accustomed to dealing with ATMs. Indeed, the number of bank branches in rural areas is still very small. Therefore, due to the closure of them, circumstances like demonetization may arise. Pradhan Mantri Janhana Yojana can also be hit by this crisis as villagers will have to face difficulties in extracting subsidy from ATMs. In most cities, 10 per cent of ATMs is non-operational due to various reasons. In such a situation, the problem of people in the city due to the closure of the ATM will be considerably increased.


ATM and its type

Automated or Automatic Teller Machine (ATM), also called Automated Banking Machine (ABM), Cash Machine, Cash Point, Cash Line etc., is an electric telecommunications device. Today, along with cash depositing and withdrawal, many non-financial transactions are also being done by this. In course of time, biometric-enabled ATM machines were installed in the rural areas to facilitating easy access to ATMs. The White Level ATM machine used in the US is now being used in India too. This ATM is owned by the third party rather than the bank. Due to the lack of banking facilities in every part of the country, mobile ATM vans are also used in India, so that all can avail the facilities of ATMs.


The beginning of ATM in India

In India, Hong Kong and Shanghai Banking Corporation had introduced the first ATM in Kolkata in 1987. “Indian Bank” introduced the first ATM among public sector banks. At that time, all the ATMs were stand alone. SBI established its first ATM in Jamshedpur in 1993. In 1997, the Indian Banks’ Association started ATM Network in Mumbai under the name of “Swadhan”, wherefrom cash could be withdrawn from any member bank’s ATM, but this network provided offline service only. Therefore, it was not popular; at that time, the facilities offered by the ATMs connected to the foreign bank’s network were extremely popular.


The Journey of ATM

The ATM was started by Barclays Bank in Britain in June 1967. The first ATM was built by the Barrow Company as the first Cash Dispenser. Just two days after this, National Westminster Bank also joined the race by establishing a machine manufactured by Chub Company.

(The latter part of the Column will continue tomorrow.)

-Satish Kumar Singh

(Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of AFTERNOON VOICE and AFTERNOON VOICE does not assume any responsibility or liability for the same.)
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