Struggling under mounting bad assets and declining profits, banks are planning to ask the Finance Ministry to foot the bill for losses incurred by them to implement the Centre’s demonetisation plan.

According to an initial estimate, the banking system lost nearly ₹1,500 crore between November 9 and December 30 to put in place systems and processes to suck out the scrapped ₹500 and ₹1,000 notes and gradually replace them with new ones.

Banks are understood to have paid about ₹1,500 per ATM to the original equipment manufacturers for recalibration and ₹4,000 per ATM to cash-in-transit companies.

The loss on account of cash handling for 40 odd banks has been pegged at ₹2,500 crore while the gain on account of incremental deposits has been put at ₹1,000 crore.

Recalibration cost

This estimate also incorporates the costs incurred by banks due to recalibration of ATMs to accommodate new notes, massive logistics exercise involved in ferrying new and old notes across the country and opportunity lost due to bank staff being engaged solely in exchanging currency instead of engaging in normal banking business.

A top public sector banker, who was part of industry-wide deliberations on the impact of demonetisation on banks, said the ₹1,500 crore compensation that banks are collectively seeking is the minimum estimated loss they have incurred to implement the demonetisation initiative.

He emphasised that the recompense that is being sought is less than 1 per cent of the ₹15.44 lakh crore worth of specified bank notes that were scrapped by the Modi government to tackle corruption, black money and fake currency.

Loss in fee income

Banks also lost out on fee income during the said period as ATM transaction charges and the commission they charge merchants for point-of-sale transactions were waived.

Besides, there was a loss in fee income as the majority of the ATMs could not be loaded with cash due to severe shortages, preventing millions of transactions from happening.

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