MUMBAI: India’s ATM operators’ association has written to the Reserve Bank of India (RBI) seeking a hike in the interchange fee paid by customers on cash withdrawals, saying their businesses will “bleed.” This could significantly impact the rollout of new ATMs in a country already battling low teller machine penetration.
The contention of these operators is that the RBI’s increased compliance standards on security and maintenance has increased the cost of running the teller machines without a corresponding increase in the revenues these companies make through fees accrued.
The current interchange fee has been set by RBI at Rs.15 per transaction with a cap of five free transactions per customer, which the Confederation of ATM industry or CATMi feels is not enough for sustenance of daily operations.
“The continued bleeding is not only impacting the viability of ATM businesses but has significantly slowed down new rollouts both by banks and white label ATM operators,” said the February 13 letter addressed to a senior RBI executive. “In the meanwhile, RBI has been relentless in demanding implementation of various compliance/control measures such as rollout of EMVs etc which is further impacting sustainability of industry players.”
A high-level committee setup by the RBI earlier in 2019 to recommend ways to increase ATM penetration in the country had submitted its findings to the central bank in December. The primary recommendation of the six-member committee was to hike the interchange fee, sources with direct knowledge told ET.
For urban areas where the population is more than 1 million the ATM committee has recommended an interchange fee of Rs 17 on financial and Rs 7 on non-financial transactions. It has also suggested capping free ATM withdrawals to three. For rural and semi-urban areas where the population is less than 1 million, the committee has recommended an interchange fee of Rs 18 for financial and Rs 8 for non-financial transactions, while free transactions could be six.
The RBI committee was headed by Indian Banks’ Association chief VG Kannan and included NPCI CEO Dilip Asbe, two senior CATMi representatives, SBI chief general manager GK Nair and HDFC liabilities head G Sampath Kumar. Meanwhile, sources told ET that deliberation on the scope of implementation of these recommendations is yet to get underway at the central bank level even as the industry is widely expecting a positive follow up on the committee report.
“NPCI has started work on the ATM committee recommendations at the back end because it also requires software tweaks but the RBI is yet to take any material decision on the implementation of these suggestions,” said an official aware of the discussions.
As per the latest RBI data, there are 227,000 ATMs operational across the country, of which 21,300 are white-label machines and the rest are owned by the banks. Historical central bank data shows that the growth of teller machines peaked in 2018 as banks stopped installing them owing to high costs.
Data also showed that only one out of five ATMs were deployed in rural geographies. For private sector banks, the rural deployment rate is less than one for every 10 ATMs.
India’s ATM penetration is among the worst for any major economy in the world. While China, the US, Germany, Brazil and South Africa all had a per capita ATM deployment rate of under 2,000, India’s ATM per capita deployment rate was at 5,919 in 2017 as per RBI’s Benchmarking Payments report.
“The entire industry is eagerly looking forward to a hike in interchange to make their ATM operations and future deployments viable,” the CATMi letter said. “We request you to implement the recommendations of the committee at the earliest as the matter impacts the very viability of White Label ATM Operators (WLAOs) and Managed Service Providers (MSPs).”