Wednesday, February 1, 2023
HomeEconomy60% ATMs still don't have upgraded security features as RBI deadline nears

60% ATMs still don’t have upgraded security features as RBI deadline nears

Sources say RBI is set to extend the deadline for 6 months or till the end of the 2019-20 fiscal as banking officials look to ensure that ATM operations are ‘not disrupted’.

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New Delhi: Around six out of 10 automated teller machines (ATMs) in the country are still not upgraded with higher security features even as the Reserve Bank of India (RBI)’s June deadline for completing the exercise approaches closer, said banking sources.

The mandated features include an upgradation of software and an overhaul of the cash-refilling system at ATMs, among other changes.

A senior official of a large private sector bank said there is confusion over the cost-sharing aspect of the move.

“Who would bear the cost — the banks or the cash management companies? Nobody is willing to undertake the responsibility as it is a sunken one-time cost,” said the official who didn’t wish to be named.

The exercise of upgrading all 2.2 lakh ATMs would cost about Rs 3,500-4,000 crore for the banking industry, said another senior executive of a private sector bank on condition of anonymity. So far, a few banks have paid for the upgradation costs, but there is reluctance on their part to go the entire distance.

“This would mean the bottomlines of banks will be hit once again and lenders are in no mood to indulge in this additional spending at this point in time,” said the first official.

Most public sector banks — barring the State Bank of India — are severely cash-strapped at present with a pile of non-performing assets.

A banking analyst said that a well thought-out cost formula needs to be put in place to ensure smoother and faster action.

The central bank is now set to extend the deadline for another six months or till the end of the 2019-20 fiscal, said government and banking sources.

In November, when the banks had approached former RBI governor Urjit Patel seeking an extension, the latter remained firm in sticking to the deadline.

Also read: RBI will issue new circular on stressed assets without ‘undue delay’: Shaktikanta Das

ATM operations

The possible RBI extension could come as a reprieve for both customers and banks, ensuring no disruption for ATM operations.

“Unlike Patel, the present governor (Shaktikanta Das) is willing to understand our problems, so we are hopeful that ATM operations won’t be disrupted, and customers will not have to suffer,” a third senior bank official added.

In November, the Confederation of ATM Industry (CATMi) had warned that about 50 per cent of the ATMs could go out of operations if the June deadline were to be followed.

So far, only about 50 per cent of the ATMs have been recalibrated for dispensation of Rs 200 currency notes even as the RBI has halted printing of Rs 2,000 banknotes.

The central bank’s 2018 annual report suggested that the share of Rs 500 and Rs 2,000 banknotes in circulation once again increased to 80.2 per cent from 72.7 per cent in 2017. However, with the RBI deciding to halt printing of Rs 2,000 bank notes, its share in the total currency basket has fallen sharply.

Expansion issue

According to CATMi, there has been no expansion of the ATM network in the country in the last couple of years.

“The number of ATMs has remained the same, though the number of bank account-holders has risen significantly,” CATMi director V. Balasubramanian told ThePrint.

In India, there are just about five ATMs to service a million customers. However, the problem is that at any given point, about 25 per cent of the total number of ATMs always remain out of service due to various reasons, including technical break down and slow cash refilling.

“This makes things even more difficult for the customers,” said a banker on condition of anonymity.

Meanwhile, with a view to pushing the growth of white label ATMs — those that are managed by non-banking entities — the RBI eased cash guidelines for operators managing these machines allowing them to source cash directly from the central bank instead of their sponsor banks.

The number of white label ATMs India is still minuscule.

Also read: India’s fintech sandbox is on its way but RBI’s draft guidelines can limit benefits


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