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Closure of about 50 per cent ATMs will create significant problems
According to the ATM Industry Organization "Confederation of ATM Industries" (KATMI), due to cost burden, which has been increasing owing to ATM inter-duty charge and the new regulatory rules whereby updating of the hardware and software of ATM, will be done of over 1 lakh ATMs and more than 15,000 White-Label ATMs, otherwise these may be closed by March, 2019.

This number is approximately half of total 2.38 Lakhs ATMs installed across the country. It is noteworthy that after printing, a large number of new notes, whose length, width and thickness were not compatible with existing ATMs, a large number of ATMs became either useless or compatible only for 100 rupee notes. In such a case, to make ATMs fit for the size of the new notes, there is a need to make changes in hardware and software, which costs too much for banks.   

It is proposed to impose Rs 15 as inter-duty charge on every transaction made from ATM. It is worth mentioning that KATMI has been demanding an increase in inter-duty charge for the last 5 years. According to an estimate, the new regulation will increase the burden of about 35 billion rupees on the ATM industry. Most damage is likely to be on White Label ATM service providers, because ATM Inter-duty charge is the main source of their income. In such circumstances, the closure of such ATMs is almost certain.

However, the Indian Banks' Association has urged the Reserve Bank of India to relax the rules, but the Reserve Bank is not in the mood to provide relief at this time. It is important that the Reserve Bank is required to charge the ATM transaction or to make various compliance requirements for the ATM. According to KATMI, ATM service providers do not have so many resources that they can afford additional expenses. However, in the changing environment, many banks across the country and ATM machines at the rental companies have started work on closing the ATM.

A little bit relief

State Bank of India (SBI) says that bank has to adhere to new regulatory requirements. Bank has two types of ATMs, one is related to themselves, which will be updated and the other is related to vendor's ATMs, which will be updated with consultation with them. There is no plan to reduce the number of ATMs by Punjab National Bank (PNB) till March 2019. It seems that the situation is not likely to worsen due to be positive attitude of these two major banks. The PNB has 9,428 ATMs across the country, while SBI has more than 59,541 ATMs till March 31, 2018.

Difficulties with ATM shutdown

The shutdown of ATMs can lead to loss of jobs, because thousands of people are dependent on the ATM industry for employment. As we know, spread of ATM in the remote area of the country is very important for financial inclusion. Therefore, the concept of 100% financial inclusion of the government could be incomplete due to half the ATM closure. Today, people in the town and rural areas have become accustomed to dealing with ATMs. Indeed, the number of bank branches in rural areas is still very small. Therefore, due to the closure of them, circumstances like demonetization may arise. Pradhan Mantri Janhana Yojana can also be hit by this crisis as villagers will have to face difficulties in extracting subsidy from ATMs. In most cities, 10 percent of ATMs are non-operational due to various reasons. In such a situation, the problem of people in the city due to the closure of the ATM will be considerably increased.

Facilities related to ATM

Deposit cash in Cash Deposit Machine (CDM) & withdrawing the cash through ATM & CDM from overdraft, KCC, CC, Current & saving accounts etc. are most important features of ATMs/CDMs. Besides, other non-financial transaction like bill payment, account inquiry, mini statement, mobile recharge, payment of credit card etc. are being done by the help of ATMs. The customer has also other advantages, for example, guarantee of banking facility available for 365 days and 24 hours, saving time and money, managing the account, reducing social crimes, techno-savvy (Helpful in motivating you to increase your interest in the use of technology), develop financial discipline in implementing financial inclusion etc.

The purpose of ATM

The invention of the ATM was originally intended to give customers banking facility outside the bank premises, because the transactions in the bank branch were a loss deal for the bank. A few years ago, customers usually used to go bank for withdrawal and transfer of money, account inquiries, statements etc. Due to the transactions done by the customers in the bank premises, the bank employees could function only on daily basis in the branches, owing to which the other important functions of the bank, such as business of insurance and mutual funds, other fee based services, marketing, loan recovery etc. were not being done smoothly. The debut of ATMs was seen as a solution to these problems.

Increasing costs of ATMs

Today, ATM has become a white elephant for banks. Their maintenance costs on an average of 75,000 to 100,000 rupees per month. This expenditure can be reimbursed only when an ATM machine has 200 transactions per day or 6000 transactions per month, while average 125 to 130 transactions in ATMs are being made per day. This is causing loss for the banks. In such a case, the burden of the proposed interbank fee charged on ATMs and the burden of the cost of bringing hardware and software changes is not easy to bear for the banks. Banks are in need of huge funds to make provisions for mounting non-performing assets (NPA) and to implement international standard like Basel III. It is clear, it will be difficult for the banks to bear any additional expenditure in the current situation.


It can be said that by the end of March, 2019 nearly half the ATMs shutdown could make negative impact on the government's digital and financial inclusion campaign. The biggest problem is the possibility of increasing problem in rural areas, because most ATMs are likely to be closed in rural areas. Today, most of rural people withdraw money from ATMs. Actually, the dependence of villagers has increased on ATMs in recent years due to the less number of branches in the rural areas. In such a situation, the difficulty of the villagers will increase due to shutting down of ATMs.

As a whole, we can say that the responsibility of bank, for example deposit, withdrawal and other non-financial transactions has now been shifted entirely at the ATMs/CDMs. In such a situation, the closure of the ATM can increase the mobility of the customers in the bank's branches for fulfilling their day to day financial need. In the case, banker will not do other important tasks, such as business of insurance and mutual funds, other fee based services, loan marketing, recovery of debt etc. In such circumstances, the bank's profitability may have negative implications. Therefore, the bank should analyze the burden of ATM's proposed cost meticulously. The government should also intervene in the matter by assessing the negative impact of digital and financial inclusion campaigns and on Prime Minister Janhan Yojana. Before adopting new rule or law, the Reserve Bank should look at all the aspects related to it, so that there is no harm to people on a wider scale due to wrong decision. 

About the author: Satish Singh is currently working as Chief Manager in State Bank of India's Economic Research Department, Corporate Centre, Mumbai, and has been writing mainly on financial and banking topics for the last 10 years.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of In case you have a opposing view, please click here to share the same in the comments section.
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