India already has the fewest ATMs per 100,000 people among BRICS nations, according to the International Monetary Fund.
Business
Standard : Finding an ATM in India is getting tougher even as
dependence on cash persists, thanks to tighter regulations that make
it more costly to run the machines.
The
number of automated teller machines in the country shrank in the past
two years despite an increase in transactions, Reserve Bank of India
figures showed Saturday. India already has the fewest ATMs per
100,000 people among BRICS nations, according to the International
Monetary Fund.
The
drop may continue as banks and ATM
operators struggle to absorb the cost of software and equipment
upgrades mandated by the central bank last year to bolster security.
That risks undermining Prime Minister Narendra Modi’s campaign of
increasing financial inclusion in a nation where cash remains king
less than three years after he pulled most banknotes from
circulation.
“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. “Penetration
in the country is already very low.”
As
security costs swell, ATM operators are being squeezed because the
fees they rely on for revenue remain low and can’t rise without the
approval of an industry committee. ATM operators – which include
banks as well as third parties – charge a so-called interchange fee
of 15 rupees to the lender whose debit or credit card is used for
cash withdrawals.
“Interchange
fees are the biggest factor behind muted growth of ATMs. They have to
reflect ground reality,” said R. Gandhi, a former RBI deputy
governor. “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,
according to R. Subramaniakumar, chief executive officer at Indian
Overseas Bank.
Access
to basic financial services including ATMs has become more crucial
after Modi added 355 million people to the banking system since
taking office in 2014. Many Indians opened accounts when the prime
minister made 86% of banknotes illegal in November 2016. That boosted
direct transfers of welfare benefits to people’s accounts,
increasing reliance on ATMs.
