RBI May Soften Penalties for ATM Cash Outage

The Reserve Bank of India (RBI) on Friday said that it was reviewing its ATM replenishment order that put in place mechanisms to penalize lenders.

Deputy Governor T Rabi Shankar said that the central bank had received inputs from lenders and was in the process of reviewing them.

“The idea behind the penalty on outages in ATMs was to ensure that these services are available as much as possible in areas where the attention to ATMs is less, which is largely rural and semi-urban areas,” Shankar said. “We have received feedback, some positive while some raise concerns. There are issues specific to location (of ATMs).

We are trying to take all the feedback and have a review and see how best it can be implemented.”

ET was the first to repot in its September 9 edition that lenders had approached the RBI seeking relaxation in its scheme citing issues of replenishing ATMs in rural geographies that could significantly pushups cost and make business unviable.

In August, the banking regulator directed banks and white-label ATM operators strengthen systems that will allow them to monitor the availability of cash in ATMs and ensure timely replacement to avoid cash-out situations. As part of the circular, a penalty of Rs. 10,000 per ATM will be levied in the event of a cash-out situation for more than 10 hours in a month.

Banks were of the view that cash availability will drop as they go deeper in rural geographies as the cost to set up and maintain ATMs is high.

“Cost of transportation for ATM fitted notes is very high rural India because of the distance between ATMS and the spares network,” a banker said on the condition of anonymity. “Generally, cash management companies and ATM service providers visit once in a few days to replenish cash and fix other tech of hardware issues.”

Banks have been slowly reducing ATM presences as they operationalize overall costs. Recently, small finance bank decided to shut down all its 26 automated teller machines, giving customers the option to use their debit cards on other banks’ ATMs, becoming the first domestic lender to completely do away with such machines. S-ET

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