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ATM mandates in India create a quandary for FIs

January 3, 2014

In the wake of a brutal machete attack on a woman at an ATM in Bangalore on Nov. 19, many of India's state governments are requesting — if not requiring — that banks post round-the-clock guards at every ATM for customer safety. The question is how to pay for it.

A recent article by Business Standard said that 24/7 security would cost banks an additional 40,000 rupees ($642) per ATM per month. The Indian Bankers Association is trying to figure out how to defray that cost, the article said.

One proposed solution is to limit the number of surcharge-free on-us transactions allowed at ATMs. After five transactions, customers would pay a fee whether or not they used their home bank's ATMs. Currently, on-us transactions are unlimited.

The option of allowing ATMs to display non-bank advertising on ATMs, providing a source of revenue to offset the cost of a guard, is also being discussed.

And of course, there's the obvious: Raise the cost of an off-us ATM fee from 15 rupees to 18 rupees (from 24 cents to 29 cents).

"Eventually, customers will have to share the cost burden," an official of a public sector bank told the Business Standard.

Any of these alternatives would require approval from the State Bank of India. And if the CEO of the program that administers the nation's social benefits program has his way, permission will not be granted anytime soon, said an article by The Times of India,

"We are not going for an increase in charges at this stage although banks have been requesting for a revision of charges," said Dr. A.P. Hota, CEO of the National Payments Corp. of India. NPCI is the conduit between the government's Aadhaar payments program and the banks that dispense the funds — often via ATM transactions.

Some banks have begun to shut down lower traffic ATMs after dark — reducing both operating and security costs — in order to keep their networks financially viable.

A second article by The Times of India said that the NPCI will convene a meeting of banks on Jan. 15 to discuss the impact to banks of increased security costs and how to resolve the issue.

In a country whose central bank aims to increase ATM numbers from a current total of around 137,000 to 400,000 in short order, the security dilemma will require a solution sooner rather than later.

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