New Delhi, May 15: Are you finding it hard to locate an ATM these days? Blame it on the tighter regulations which are making it more costly to run these machines.
As per Reserve Bank of India figures, the number of ATMs in India has reduced in the past two years despite an increase in transactions. According to the International Monetary Fund, India has the fewest ATMs per 100,000 people among BRICS nations.
The cost of equipment and software upgrades mandated by the central bank last year to tighten security is the reason that the ATM operators are struggling with and therefore, the drop in number of ATMs might continue.
“Declining numbers of ATMs will impact a large segment of the population, especially those who are socio-economically at the bottom of the pyramid,’’ said Rustom Irani, managing director at Hitachi Payment Services Pvt. Ltd., a provider of the machines to The Economic Times.
As security costs increases, ATM operators are in pressure due to the fees they are dependent on for revenue remain low and can’t rise without the approval of an industry committee. ATM operators charge an interchange fee of 15 rupees to the lender whose debit or credit card is used for cash withdrawals.
"These interchange fees are one of the biggest factors behind the dull growth of the ATMs. They have to reflect ground reality,” said R. Gandhi, a former RBI deputy governor to the newspaper. “Banks are finding it cheaper to pay interchange fees to other banks rather than operating their own ATMs.”
Yet not everyone agrees that increasing fees is the solution. If they are raised, banks might pass the higher charges on to customers, said R. Subramaniakumar, chief executive officer at Indian Overseas Bank to The Economic Times.
After Modi added 355 million people to the banking system since taking office in 2014, access to basic financial services including ATMs has become more crucial.
After demonetization in November 2016, many Indians opened accounts which boosted direct transfers of welfare benefits to people’s accounts, that lead to an increasing dependence on ATMs.
Another factor behind the drop in ATMs is branch rationalization by some public-sector lenders. State Bank of India cut 1,000 outlets in the first half of fiscal 2018 after acquiring five associate banks and a local lender.
Banks will rely less on branches in the future as digitization changes how the sector operates, said Dinesh Kumar Khara, a managing director at SBI to The Economic Times. One in two ATMs are located at bank branches.
Mobile banking is likely to boost due to the declining number of ATMs. In a country with the world’s largest millennial and Generation Z populations the mobile banking can see a rapid growth. In the last five years, the number of mobile banking transactions has grown 65 times more.
“People are shifting to mobile apps. It’s too early to write an obituary on ATMs but it’s certainly declining. No one will invest in a declining proposition.” ” said Ashutosh Khajuria, chief financial officer at Federal Bank Ltd to The Economic Times.
News 24 Bureau with Agencies
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