Whenever 30-year-old Ramesh Patel leaves to go to an Automated teller machine (ATM), he starts with a prayer that at least one of the ATMs, if not his bank’s machine, delivers cash.
A resident of Pune, Patel says that getting money from an ATM since demonetisation has become a chore and he has to make several trips to get some cash in hand, even after six months of the announcement. “On a few lucky days, I return with some cash but most often than not, the ATMs just do not have the cash,” he says.
Prime Minister Narendra Modi announced the decision to ban Rs 500 and Rs 1,000 notes late on 8 November 2016 to fight black money, corruption and break the back of terror finance. The ban came into effect from the midnight of 8 November.
Six months after demonetisation came into effect on 9 November, things have improved from the initial days of note ban but ATMs in many parts of the country still continue to run largely dry. The situation is worse in the rural hinterland. ATMs and point of sale (PoS) system service providers Firstpost spoke to said that though the current situation with regard to ATMs is far from normal, they are able to meet almost 70-80 percent of customers’ requirements.
"On an average day, our ATMs function 75-80 percent," said K Srinivas, managing director and CEO, BTI Payments Pvt Ltd, a joint venture between Banktech Group and ICICI Ventures. It is into white label ATMS which are placed inside grocery, telecom stores, etc, in tier-3 and other small towns and villages.
White label ATMs are not owned by banks and are just cash-dispensing machines.
The company has 4,258 ATMs under its brand name. On any given day, they run at 75 percent capacity. The issue it faces is a shortage in preferred denomination notes by its users. “Most of our customers prefer notes in denomination of Rs 500 and Rs 100. There is a shortage of these currency notes,” Srinivas said.
ATMs continue to run dry in some places in the country. These include Pune, Telangana, some parts of Gujarat, Lucknow and also Mumbai and Delhi during certain periods in a month when customers queue up to withdraw salary.
Almost all the ATMs of NCR are fully functional, said Navroze Dastur, Managing Director. NCR Corporation India Pvt Ltd has 50 percent share of the overall 1.10 lakh ATMs deployed by the banks. However, close to 20-25 percent of the ATMs at any given point of time run out of cash due to shortage of currency notes, he said.
Need vs availability
Most operators can refill the ATMs everyday if cash is made available to them but that has not been the case since demonetisation.
The challenge for banks is to make a decision to distribute the cash it receives from the Reserve Bank of India (RBI) between its branches and ATM channels. Some banks allegedly prefer to allocate large portions of cash to its branches rather than the ATMs as this helps them serve their own customers who walk into the branches rather than load the ATM which can be accessed by any bank customer.
The other issue that most operators face is that the number of banks they source for cash has been halved from what was earlier. “We would source cash from various banks in 200 locations and now that has come down to 100 locations. Fundamentally, that means I get cash in fewer locations and I have to transport it to longer distances. Logistics then becomes a challenge,” Srinivas said. This is compounded by the fact that the denominations the customers want are not available, he says.
Hitachi Payments Services has a cash and non-cash platform and manages 55,000 ATMs and half a million PoS and mobile PoS machines that manage cash and non-cash transactions. “We saw the brunt of demonetisation on both fronts -- ATMs and PoS. We were the nodal agency to recalibrate ATMs for the RBI. When money started trickling in, 70 percent of the money was remonetised,” says Jayant D’Mello, director, sales and marketing and White Label Business, Hitachi Payments Services.
During the demonetisation period, Hitachi Payment Services saw an upsurge of 300 percent in POS transactions and once the RBI lifted cash withdrawal restrictions, it saw a reduction in these transactions. “There has been a 12 to 13 percent rise in total transaction in ATM and POS before and after demonetisation, signifying a healthy move to retail electronic transactions,” D’Mello said.
Though the government’s move to transform the country to digital payments system has been hailed as positive, the ground reality is anything but friendly towards that move. Many vegetable sellers or the local egg or bread vendors still prefer cash. Their daily transactions don’t warrant a bank account.
Since the availability of currency notes is allegedly being rationed by banks, payment services companies have to also ration it across its ATMs.
“We refill ATMs depending on the location and the demand for cash. That is a risk we have to take,” said Srinivas. At any given point of time, not all ATMs are functional, but no ATM has been shut on account of no cash, he said.
To blame the RBI for shortage of cash in ATMs is not entirely correct, says D’Mello. He reasons that people are withdrawing more money which is evident due to increase in ticket size.
The peak salary period is from 26th of one month to 12th of the next month. ATM service providers along with the banks start building their cash reserves before the 26th. The request from ATM operators to the bank during this period is higher than normal. For instance, if during normal periods (before salary period) the service providers ask for Rs 100 and the bank gives them Rs 70, during the peak period every month, they ask for Rs 120 and get Rs 70. “Now that is a double whammy, for more money is withdrawn during the salary period while we continue to get less cash. As a result the ATMs run dry more in the peak periods,” says D’Mello.
The service providers hope that matters will get sorted out soon as they have seen a substantial increase in the demand for cash, but due to its low supply there is a decline in transactions which is impacting the industry.
The way out
The solution would be to increase the pace of remonetisation, experts said. Banks should now consider deploying cash recycling ATMs, suggests D’Mello.
In an ATM you can only withdraw money. A cash recycling ATM will enable consumers to deposit cash and hence recycle valuable cash in the “less-cash” areas.
With instant credit available, the kirana store guy would also be encouraged to deposit the day’s revenue into the cash recycling machine so that it is available for use throughout the day especially early morning for consumers.
Updated Date: May 12, 2017 12:01 PM