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ATM companies wary of RBIs new cash-out fine

The Reserve Bank of India's (RBI) decision to fine banks Rs.10,000 for each incident of an ATM running out of cash for 10 hours has elicited varied reactions. ATM operators (also known as managed service providers, or MSPs) and cash-in-transit firms are wringing their hands and declaring that they will not be held liable.

The RBI sent a circular to banks this week advising them to keep an eye on the amount of cash at ATMs and ensure that no cash-outs occur. According to the circular, if a bank withdraws money from an ATM for more than 10 hours in a month, it would be penalized Rs.10,000.

"Certain places have ATMs that run out of cash within hours after being filled. If there is a monthly penalty, these machines may not be viable to operate "According to a top executive at an MSP business. In the nation, there are 2,13,766 ATMs, the majority of them are operated by MSPs who hire cash-in-transit firms to refill the currency notes in the machines.

The laws, according to MSPs, are well-intentioned since they recognize the importance of cash in the economy and place the responsibility for ensuring cash availability on banks. They claim, however, that the punishment is ill-conceived because banks outsource the majority of their Labour and see rules as something to be passed on to MSPs.

"While the purpose behind this RBI Circular is commendable, the penalty method alone makes it unlikely that this penalty would be passed on to banks, MSPs, and cash logistics companies," said Rituraj Sinha, group managing director of SIS, India's biggest security and cash-in-transit firm. What has to be addressed, according to Sinha, are the fundamental reasons for ATMs running dry, such as poor cash forecasting and delays in the supply of ATM-fit money.

"On the ground implementation of the RBI circular dated April 2018 is the real solution," he said. "Not only before better security, but also more accurate cash forecasting and on-time availability of currency to enable cash logistics agencies to upload ATMs on time and with an adequate amount of currency. According to the 2018 circular, banks must implement strict procedures such as transferring cash in cassettes in a defined vehicle and adhering to government guidelines for currency transportation during specific hours of the day.

According to banks, implementing all of these regulations within current cost structures is challenging.

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