The Reserve Bank of India (RBI) has advised banks to speed up ATM upgrades as overhaul deadline nears, The Economic Times has reported citing people familiar with the matter.
The banks in the country are facing penalties for missed deadlines as per the ATM security and cash management norms introduced by the central bank in 2018 and 2019.
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According to these norms, banks need to replace the outdated cash-replenishment system with a new cassette swapping system, ramp up e-surveillance, install digital locks and upgrade the operating systems.
However, most lenders have not initiated these upgrades as they are costlier than the central bank’s estimates, the report added.
A report reviewed by the publication said: “If Cassette Swap model has to be mandatorily implemented it will raise the cost of total expenses and indirectly impact the interchange and customer fees, by about 15%.”
The assessment submitted by the country’s banking industry to an RBI constituted committee reveals that it would cost about INR30bn to revamp the ATMs.
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By GlobalDataHowever, according to RBI’s calculations, the overhaul would cost the industry only about INR1.6bn.
Therefore, the committee has advised the central bank to introduce a population-based pricing mechanism.
According to this pricing model, the interchange fees in towns with more than one million populations will be increased to INR18 and INR17 elsewhere, from the current INR15.
A source said: “Most acquirer banks that operate ATMs are waiting for a hike in interchange rates or some compensation mechanism to cover for these costs. At present less than 5% of ATMs would have been upgraded.”
Currently, HDFC Bank, Axis Bank, and ICICI Bank have upgraded e-surveillance at on-site ATMs, according to ET.
