Rs 500, Rs 1,000 notes banned: What is ATM Recalibration and why it could take 2-3 weeks

Naina KhedekarNov 15, 2016 08:55:02 IST

To people's shock and delight, they've been carrying bundles of Rs 100, Rs 50 and even Rs 20 and even the new Rs 2,000 notes as they exchange or withdraw money from banks. The ATMs are dispensing Rs 100s in cities as the ATMs across the nation aren't calibrated to dispense the new Rs 500 or Rs 2,000 notes.

The Finance Minister Arun Jaitley called it a massive operation and said that would take about 2-3 weeks. The reason for not calibrating the ATMs earlier was to maintain secrecy as the task involves thousands of people. And anyway, wasn't the ban supposed to be Prime Minister Narendra Modi's big surprise? Along with demonetisation, recalibration of ATMSs seem to be the new buzzwords, and if you are wondering what all the fuss around recalibration is about, here's what you need to know.

How the ATM works
In an ATM, there are what can be called 'cassettes configured to dispense Rs 1,000, Rs 500 and Rs 100 notes, In rural areas, you will find cassettes configured to dispense even Rs 50. An ATM cassette is specifically designed to fit an ATM and help dispense cash out properly. A single cassette will contain anywhere between 2,000 to 2,500 currency bills.

Though different ATMs use different technology, there is a generic approach that could help us understand the approach properly, said Manjunath Rao, Senior Vice President and Head of Sales at CMS Infosystems Pvt. Ltd. CMS leads in driving the cash cycle in India, from banks’ currency chests to ATMs, to retail stores to wallets. It has also launched this ATM Finder which can help you get hold of cash.

Image: Reuters

These cassettes have an electronic setting at the back-end, so, when docked to a machine, it will tell the machine that the cassette is configured for Rs 10,000. Then there is the software setting that helps dispense the types of notes. For instance, a cassette is configured for Rs 1,000 notes, and likewise two other cassettes carry denominations of Rs 500 and Rs 100. When you withdraw Rs 3000, the software will pick up one or two notes of Rs 1,000 and the remainder in Rs 500 or Rs 100 notes, which will depend on the logic built into the machine. The banks usually decide on the software logic behind the dispensing of cash.

Why the need for recalibration
Rao has explained that the new currency notes — Rs 500 and Rs 2,000 — are slightly smaller in size as the width of the these notes is slightly smaller. And, by recalibration, it now means that banks will have to remove the Rs 1,000 cassette setting and replace it with a new setting to match the new Rs 2,000 notes. Clearly, this will involve some software as well as hardware changes.

Since, the new notes are slightly smaller, there is the need to adjust the grilles that hold these notes inside the cassette, he adds. A type of railing is fitted within, which ensures that these notes are dispensed one by one and pushed by a push-plate. In front of the cassette, there are rollers that pull these notes one by one and then pushes them out. So, it is important that the notes be set up in a way that helps dispensing them in a smooth manner one by one without any folds or the possibility of them getting stuck. Essentially, the railings will have to be adjusted to hold the new smaller notes firmly, and and the software related to cassettes will also have to be changed.

Image: Diebold

Why will it take 2-3 weeks?
"Each ATM will have to visited and configured to make these changes," Rao adds. The software-hardware balance will be needed to help dispensing the notes.

Rao explains that most banks have got hold of whatever cash they could and dispatched it to branches, and now the rest is planned for ATMs. Banks have called OEMs and service providers to decide on settings, taking advice on settings and jotting a plan. If an ATM's servicing has been outsourced to a cash service agency, meaning the ones who hold the combination lock to cash, then they will have to accompany the engineer. So, the engineer will get the cassette configured and the cash service agency will fill in the cash. In case a bank hasn't outsourced and fills the cash itself, then a bank custodian will have to accompany the engineer.

Now, the uphill task is to ensure cash availability, availability of the engineer, cash service agency or bank custodian all at the same place and time, and then manage the same for an entire network across India from cities and towns to the remotest villages with ATMs. "CMS has been given a list and the engineers are now running around. The next 3-4 days will be very hectic," he adds.

Depending upon its network, it may not take 2-3 weeks. But there are players with bigger and denser networks. For instance, co-ordination could be an even tougher task for companies like NCR, which manage more than 100k ATMs. It could take them 10-15 days to sort things out. 'It's coordination that everyone is now trying their best at," he adds.