
Major Indian banks have reportedly raised concerns about a significant shortage of automated teller machines (ATMs) in the country, prompting appeals to both the government and the Reserve Bank of India (RBI). But what had led to this ATM shortage in the country. Let’s understand this in detail.
Banks are gearing up for a major expansion of their ATM networks over the next 12-18 months. They plan to replace around 40,000 aging ATMs and install approximately 10,000 new machines, according to industry estimates. In the fiscal year 2023, scheduled banks collectively added 4,452 ATMs, increasing the total network to 219,513 by the end of March, according to RBI data. White label ATM operators also expanded their network by 4,292 ATMs, bringing their total to 35,791 during the same period.
Policy Bottlenecks
The shortage of ATMs in India is partly attributed to the ‘Make in India’ initiative, which aimed to boost domestic manufacturing across various sectors, including ATM production. However, the policy guidelines introduced in FY20 have inadvertently created significant delays for ATM vendors, who were required to set up operations within India. This delay is a primary factor behind the current shortage of ATMs.
Government e-Marketplace Challenges
State-run banks are mandated to procure ATMs through the government e-marketplace, known as the GeM portal. While this portal aims to streamline procurement and ensure transparency, it has become a restriction for lenders. Not all ATM vendors are registered on the GeM portal, and there is a need for more clarity on the process and guidelines to avoid any vigilance action. Banks have sought a meeting with officials from GeM to address these challenges. Banks are proposing a more flexible approach where they are allowed to float independent requests for proposals (RFPs) for ATMs, provided all guidelines are adhered to.
Troubles for Bankers
The shortage of ATMs is significantly impacting banks, particularly as they transition to lockable cassette mechanisms in ATMs, in accordance with RBI directives. The RBI instructed banks to upgrade their ATMs with lockable cassette mechanisms in 2023 to improve security and reduce accounting discrepancies. However, the implementation has fallen short of targets, which could lead to regulatory action, including fines. Poor infrastructure issues, including vaulting arrangements, have also contributed to the delay in implementing the lockable cassette mechanisms. Banks are seeking a further extension to fully implement this due to these constraints.
Cash-Recycling Machines & Costing
In addition to ATMs, banks are increasingly turning to cash recycling machines to enhance efficiency and customer experience. As banks undergo a technological refresh of ATMs, the demand for cash recycling machines is expected to grow. The industry is ready to meet this demand, and the GeM portal is seen as a robust platform to facilitate the procurement process.
An ATM costs around Rs 3.5 lakh, while a cash recycler costs about Rs 6 lakh. If 25 percent of the 50,000 new ATMs deployed are cash recyclers, the total capital expenditure for banks could reach approximately Rs 2,000 crore.
Overall, the shortage of ATMs in India is a result of policy bottlenecks, challenges with the government e-marketplace, and difficulties faced by banks in implementing lockable cassette mechanisms. Banks are actively seeking solutions to address these issues and ensure an adequate supply of ATMs in the country.
No accountabilty, market short of small notes, no new notes its failure of policy makers