Why your ATMs may be running out of cash

Unable to withdraw cash at your neighbourhood ATM?

Don’t be surprised.

The collapse of an ATM service provider is causing disruptions across India.

AGS Transact Technologies, which operates and refills ATMs across the country, has collapsed.

As a result, many ATMs of prominent banks are running short of cash.

But what happened? What happens next?

Let’s take a closer look:

What happened?

As per Moneycontrol, in February, a number of ICICI ATMs ran short of cash.

This after employees of AGS Transact Technologies refused to refill them to protest not being paid their salaries for months.

The company, promoted by Ravi Goyal, was at the time said to be on the verge of collapse.

Then, last week, the firm announced that it and its units defaulted in paying obligations worth Rs 385.9 million.

The company and its unit Securevalue India “defaulted in the payment of principal repayment obligations for certain outstanding borrowings” worth Rs 212.3 million, it said.

The company and Securevalue owe a total of Rs 7.19 billion to their creditors, which includes the State Bank of India and Axis Bank, it said.

The company has been grappling with financial strain, leading to credit rating downgrades from agencies Crisil and India Ratings, and the resignation of all four of its independent directors over “personal reasons.”

Moneycontrol quoted India Ratings as saying, “The liquidity of AGS Transact was hugely impacted by a stretch in its receivable days caused by the holdback of payments by its customers due to non-payment of statutory dues and non-adherence to service level agreements (SLAs). According to the management, the company intends to aid liquidity by improving its collection cycle and fund infusion by the ultimate promoter through the issuance of share warrants.

“Crisil Ratings believes that the company’s liquidity has sharply deteriorated over the past 2-3 months, owing to the delay in receivables,” Crisil stated.

Now, as per Economic Times, this has resulted a number of banks including State Bank of India and ICICI Bank are also facing trouble servicing around 38,000 ATMs which are running short of cash.

SBI has 14,000 ATMs which are affected, of which 7,000 to 8,000 of those are managed by AGS Transact.

Axis, meanwhile, has around 5,000 ATMs managed by AGS Transact.

As per Outlook Money, India Post and Yes Bank are also affected in around 1,000 and 500 ATMs respectively.

ICICI Bank was among the first to switch its ATMs to other service providers.

The bank had faced trouble with AGS as far back as December.

“We would often receive complaints from customers that some ATMs don’t have cash any time during the week. When we started assessing the situation, we realised that these ATMs were not being replenished at all, although we would have given instructions to AGS Transact for refilling the ATMs. Increasingly, it started becoming a pattern and we found this problem mostly with ATMs serviced by AGS Transact,” a banker told Moneycontrol on condition of anonymity.

“It was around December that defaults started increasing significantly,” a senior executive with another private bank added.

The banks then decided to alert the Reserve Bank of India (RBI).

What happens next?

AGS Transact is facing insolvency proceedings.
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Economic Times_ quoted the firm is saying that Maxwel Aircon India, one of its creditors, is planning to file an insolvency claim over alleged unpaid dues.

The banks, meanwhile, have been left struggling to cope.

“The potential bankruptcy of AGS Transact has left several banks scrambling to service their ATMs," an official in the know told the newspaper. “While banks have been facing poor service quality from the company for the last 12 months, they are also struggling to reconcile and move their ATMs out of the AGS Transact network.”

“The company is actively working with our banking customers and has migrated several critically affected ATMs in our network to peer networks to ensure minimal disruption,” AGS Transact told the newspaper.

“We have been gradually resuming operations across our network and will continue to consider migrating ATMs wherever necessary_._

With inputs from agencies