ATM Industry Members Seek Higher Interchange Rate in Light of Recent Guidelines by RBI

In light of recent onerous guidelines by the Reserve Bank of India that will result in an overall cost increase for the ATM service providers, the Confederation of ATM Industry (CATMi), a registered non-profit trade association of leading companies in the ATM industry, seeks that banks consider a higher interchange rate for the ATM transactions so as to make these changes viable for the ATM industry.

The recent circular by RBI deems that banks shall put in place certain minimum standards in their arrangements with the service providers for cash management related activities within 90 days from the date of the circular. These include that the provider should have a minimum fleet size of 300 specifically fabricated cash vans, with two custodians and two armed security guards besides the driver, each cash van should be GPS enabled and monitored live with geo-fencing mapping with the additional indication of the nearest police station in the corridor for emergency, ATM operations should be carried out only by certified personnel who have completed minimum hours of classroom learning and training among others.

Another circular pertains to banks considering using lockable cassettes in their ATMs which shall be swapped at the time of cash replenishment, in order to mitigate risks involved in open cash replenishment/ top-up. This will replace the traditional top-up method, where the service provider would note the currency disbursed and replenish the cassette with currency. The swap of cassettes requires a massive investment by the ATM service providers, as additional cassettes will have to be available for all ATMs, instead of use of the same cassette. The above may be implemented in a phased manner covering at least one third ATMs operated by the banks every year, such that all ATMs achieve cassette swap by 31 March, 2021.

The resultant increase in cost from both these directives means that banks will have to pay for cost of increased compliance or where there is a pay-per-use model, the issuer bank pays the increased per transaction fee for its card holders transacting on other Bank ATMs. This fee, commonly referred to as ATM interchange, is the fee that banks pay each other for the use of their ATMs by other banks’ customers. This is currently fixed at 15 rupees per cash transaction and 5 rupees for a non-cash transaction. This needs to go up by at least 3 to 5 rupees to enable operators to keep their operations going as costs have risen considerably. Otherwise, the implementation of these changes is not viable for the ATM service providers at all.

K. Srinivas, director of CATMi and MD, BTI Payments Private Limited, said, “While we welcome the recent move by the RBI to strengthen the cash management infrastructure so as to avoid losses to banks and end-customers, we exhort the RBI and NPCI to immediately increase the interchange rate in order to make this viable for the ATM services industry. ATM operators are already saddled with higher costs of Euro Master Visa (EMV) protocol and Biometrics implementation. Added costs of cash management will make the operations unviable for Bank ATM operators and White Label ATM operators and will force closure of several ATMs.”

Himanshu Pujara, director, CATMi and MD, Euronet Services India Private Limited, added, “An interchange rate below cost of servicing each transaction will mean that the much-needed ATM expansion in semi-urban and rural areas is likely to slow down. We, at CATMi, have been in discussions with RBI and NPCI and are hopeful that a decision to increase interchange rate is taken on priority.”