As per the CATMi report by 2018 November India has approximately 2,38,000 ATMs, of which around 1,13,000 ATMs, including 1,00,000 non-urban areas and more than 15,000 brown-label ATM deployers (BLAs) and white label ATMs(WLAs), are expected to shut down. 

The new regulations may lead to the closure of early half of the total 2.38 lakh ATMs in the country by March 2019, reported PTI citing Confederation of ATM Industry (CATMi).

“The industry has reached a "tipping point" and hence the forced closure is on account of unviability of operations brought about by recent regulatory guidelines for ATMs hardware and software upgrades, recent mandates on cash management standards and the Cassette Swap method of loading cash,” CATMi said.

Its members, which include the ATM managed service providers (MSPs), brown-label ATM deployers (BLAs) and White Label ATM (WLAs) operators, are already reeling under the financial impact caused by huge losses during and post-demonetisation as cash supply was impacted and remained inconsistent for months. The situation has further deteriorated now due to the additional compliance requirements that call for a huge cost outlay. The service providers do not have the financial means to meet such massive costs and may be forced to shut down these ATMs, unless banks step in to bear the load of the additional cost of compliances.

A majority of the ATMs which can be shut down will be in the non-urban areas, it said, underlining that this can impact the financial inclusion efforts as beneficiaries use the machines to withdraw government subsidies. A large number of ATMs in non-urban locations may be shut down due to unviability of operations. If this happens, the financial inclusion programme would be severely impacted as millions of beneficiaries under the government’s Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, who withdraw subsidies in the form of cash through ATMs, may find their neighbor hood ATM shut, the CATMI added.

The revenues from providing ATMs as a service are not growing at all due to very low ATM interchange and ever-increasing costs. CATMi estimates an additional outlay of about Rs 3,500 crore – only for complying with the new cash logistics and cassette swap method. These requirements were never anticipated by the industry participants at the time of signing contracts with the banks. Many of these agreements were inked four to five years ago when no such requirements were in sight. According to the body, the only solution to this problem is if banks "step in to bear the load of the additional cost of compliances”. The revenues for providing ATMs services are not growing at all due because of extremely low ATM interchange charges and increasing costs. These changes are not expected when deployers sign the contracts with banks. The statement also revealed about 15,000 ATMs run by WLAOs can be shut down as they have accumulated losses.

In April, the RBI had mandated a minimum net worth of ₹100 crore for service providers and their sub-contractors handling cash management logistics on behalf of banks. It also directed cash vans transporting money to have CCTVs, GPS connectivity, tubeless tyres, hooters and wireless communication systems. Approximately 100,000 off-site ATMs, and over 15,000 non-bank ATMs could shut down. According to Reserve Bank of India (RBI) data, India had 221,492 ATMs as of September-end. 

If ATM deployers are not compensated by banks for making these investments, the deployers are likely to surrender the contracts which might lead to the closure of ATMs on a large scale.

It may result in huge job losses in the industry that would be deleterious to financial services in the economy of India as a whole.