ATM operators wary of RBI’s cash-out penalty

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The Reserve Bank of India (RBI) recently announced that banks will be slapped with a fine of Rs 10,000 if an ATM runs out of cash for 10 hours in a month. This move has garnered mixed reactions from different stakeholders of the banking system. ATM operators, who are also known as Managed Service Providers or MSPs and cash-in-transit companies have not stated that they will not be bearing the penalty if imposed.

The circular that was sent out earlier this week by the RBI stated that banks should undertake the task of monitoring the availability of cash in ATMs and make sure they never run out of it. In addition to this, banks will also cough up a fine of Rs 10,000 if any ATM runs dry for over 10 hours in a month.

ATM operators are cautious

A senior official at an MSP has said that there are a few places in the county where ATMs are emptied within a matter of a few hours after they are loaded, according to a report in The Times of India. The official added that the feasibility of operating ATMs will diminish to zero if such penalties are imposed monthly.

India as of now has 2,13,766 ATMs, the majority of which are managed and operated by MSPs who hire cash-in-transit firms to restock the machine with currency notes. MSPs are of the opinion that the intention behind the regulation is good as it takes cognisance of the role played by cash in the economy and also puts the onus of ensuring cash availability directly on the banks.

However, they feel that the penalty provisions should be properly thought out since banks outsource the work pertaining to ATMs and pass on such regulations to the MSPs.

Rituraj Sinha, GMD of SIS, India’s largest security and cash-in-transit company said that the root cause behind ATMs running dry should be addressed. Some of the causes are delays in the availability of ATM-fit currency and sub-optimal cash forecasting.

Sinha also added that the intent behind the regulation put forth by RBI is welcome but a penalty approach is not likely to be enough to sort problems of cash outage at ATMs. He felt that the penalty will be passed on from the bank to MSPs, who will in turn pass it on to cash-in-transit firms.