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To encourage banks and white-label ATM operators (WLAOs) to set up more ATMs in rural areas, where penetration is currently low, the government should consider giving incentives such as extra interchange fee or subsidy in electricity and other support structure required to set up ATMs, according to a Director of the Confederation of ATM Industry (CATMi).
According to RBI data, as of March-end 2019, only 19 per cent of the total ATM network of 2,21,703 in the country was deployed in rural areas.
This is woefully inadequate, given that the government is vigorously pushing direct benefit transfer (DBT) related to welfare schemes, including rural employment, LPG subsidy, social assistance programme, scholarship schemes and fertilisers, and the beneficiaries will require touch-points closer home to withdraw money. In FY2019, ₹65,561 crore was transferred under DBT to the beneficiaries.
Radha Ramadorai, MD (ATM and Allied Services Business), FIS, and Director of CATMi, said: “The number of ATMs is not enough. Today, especially in the rural areas, there are only five ATMs per one lakh population, whereas in metros, there are 50 ATMs per one lakh population.
“This (deployment of ATMs) is quite lop-sided. So, there is a requirement to deploy more ATMs in rural areas. In this regard, the ATM association and others have been talking to banks, RBI and other decision-makers to incentivise deployment of ATMs in rural areas.”
She elaborated that if some kind of incentive – may be extra interchange fee or some kind of subsidy in electricity and other support structure that banks and WLAOs require to set up ATMs – can be given by the authorities for deploying ATMs in rural areas, the cost of operations will come down. So, banks, as well as WLAOs, will be encouraged to set up ATMs in these areas. The RBI’s Committee on Deepening of Digital Payments, which was headed by Nandan Nilekani, Former Chairman, Unique Identification Authority of India, has observed that rural centres, which have the largest populations (and areas), have the lowest ATM numbers. The committee felt that there is a concern about the viability of ATMs, even though the average number of cash withdrawal transactions per ATM is around 125 per day.
“The cost of ATM transactions is high due to the high costs of compliance and operations. As a result, scheduled commercial banks have been reducing their investments in ATMs (and reducing their count as well).
“This is an indicator that ATM operations may not be viable, and that their costs may need to be revisited. ATM networks are important to ensure that people are comfortable; that they can access cash when required,” the committee said.
A viable model
However, there is a need to work out a viable model for ATMs in a less cash world. ATM operators, according to the committee, must start to explore options, such as reimagining them as an access point for a large number of banking and financial services, and as a channel for customer education, awareness, and support.
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