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Cassette swap norms: After RBI’s refusal, banks seek FM’s intervention

K Ram Kumar Mumbai | Updated on November 04, 2018

An ATM money cassette   -  istock.com/ET1972

Higher operational costs and risk of robbery associated with boxes: lenders

Banks are planning to seek the Finance Ministry’s intervention in reviewing guidelines on using lockable cassettes in ATM machines. This comes after the Reserve Bank of India refused to review the guidelines it had issued in April 2018.

The RBI had advised banks to use lockable cassettes in their ATMs instead of open cash replenishment/top-up to mitigate risks. Banks, however, want the guidelines on using lockable cassettes in their ATMs reviewed as it entails a huge investment of about ₹6,800 crore and there are operational difficulties in implementing the same. “Though the central bank may not like it, we have been left with no choice but to seek DFS’ (Department of Financial Services) intervention in the matter. There are logistical and infrastructural challenges in implementing the cassette swap facility in ATMs. The benefits are not commensurate with the huge investment and expenditure involved,” said a senior public sector bank (PSB) official.

Higher operational costs

“If banks press for an increase in ATM charges to recover the investment on implementing cassette swap facility and operational costs, which together will run into a few thousand crore rupees, it may not be liked by the public and the government,” explained another PSB official. The central bank asked banks to implement cassette swapping in ATMs in a phased manner covering at least one-third ATMs operated by the banks every year, such that all ATMs achieve cassette swap by March 31, 2021.

As per estimates, each ATM will require three sets of five cassettes — one set in the ATM, one in transit and another at branch/cash-in-transit (CIT) company (ready for loading next day). The cost of each cassette is ₹20,000. As on August-end 2018, there were 2,28,422 ATMs across the country. So, if all these ATMs were to have the cassette swap facility then banks will end up spending about ₹6,850 crore. Banks will have to make changes in the service level agreement (SLA) with managed service providers (MSPs) to implement the cassette swap facility for replenishing cash in ATMs. So, MSPs will demand higher compensation for doing this as the current SLA doesn’t cover cassette swap. CIT firms will need to plan for two- to three-fold increase in their fleet of cash vans as carrying cassettes will be more space consuming as compared to carrying cash in trunks. Also, existing vehicles will need modification for carrying cassettes instead of cash trunks.

Further, there are fears of an increase in theft and robbery as the quantum of cash carried to and from ATMs will be higher. Currently, once cash is loaded, the vehicles come back empty. In the new scenario, cash will always be available in transit while going to (for cassettes to be loaded) and coming back (for cassettes carrying residual cash back) from the ATMs.

Published on November 04, 2018

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