ATM closure threat: RBI shouldn’t buckle

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Despite the rising popularity of UPI and digital payments, ATMs remain one of the most preferred destination for banking transactions for a vast number of people in this country. These 24X7 machines have actually turned into substitutes for bank branches. For withdrawing cash, almost none goes to a bank anymore but heads to the nearest ATM.

The Confederation of ATM Industry has told the RBI that if it insists on the Rs 10,000 penalty for a cash outage in an ATM for 10 hours or more, they might have to shut down machines in far-flung areas. It is an outright threat and an attempt to blackmail the banking regulator. ATMs have to be fed cash as soon as possible since leaving them dry will defeat the purpose of having them. Despite the push for digital and online payments, the use of cash in the economy has risen in the past several months. RBI should not cow down before the threat but could, at the most, think of a calibrated penalty structure.

ATMs can be graded according to their distance from cash replenishment points. Leniency might be considered for remoteness and a penalty structure commensurate with the remoteness might be considered. Those ATMS that are at very remote locations might be allowed a longer cash outage and smaller penalty. Those that are relatively closer can be allowed a smaller outage period. But those which are in cities or suburbs should not be allowed more than 10 hours of tolerance limit. The cut off distances between ATMs and cash replenishment points can be decided through discussion between the banking regulator and the ATM association.

According to current practice 42 percent of rural ATMs are fed cash once a week, while 20 percent are loaded twice a week. The rest are fed every alternate day. The association has said that some banks have already started charging penalty from entities maintaining ATMs and it is hurting them. Pushing them further will result in closure of some of the ATMs which will put a lot of people in difficulty. Such a straightjacket formula for feeding cash is bound to cause hardships for the people. A departure from ‘one-penalty-fits-all’ might be the way out.