As more and more banks permit higher withdrawal limits of Rs 1 lakh to select debit card holders, the costs of refilling automated teller machines (ATMs) with cash will mount for banks.
On June 1, 2010, HDFC Bank extended the withdrawal for its Imperia Gold Debit Cards to Rs 1 lakh per day. Limits on other cards too have been raised. ICICI Bank already offers a Rs 1 lakh withdrawal limit for its card holders in the higher spectrum. This would result in higher amount transactions at ATMs and the money in the teller machines would need to be refilled more often then before.
Loney Antony, managing director of payment services firm Prizm Payments, says, “On transactions at other bank ATMs, there is a limit of Rs 10,000 per transaction and only five such transactions are allowed in a month. So banks have to meet the higher limit for only their own customers at their own ATMs. If people withdraw more money then cash requirements may go up.”
Jaivinder Gill, managing director of NCR Corporation India, says, “We foresee the withdrawal limit hike to have a positive impact on the number of high-value transactions at ATMs, since customers now don’t need to restrict their large transactions to banking hours.” As most banks in India use external agencies to refill cash, they would have to pay a higher amount for additional cash refilling.
Ramesh Mengawade, CEO, Opus Software and ElectraCard Services, involved in ATM management, says, “The frequency of replenishing cash per week will increase. This would mean additional costs (for vendors refilling cash and in turn banks) as instead of five trips, he (the vendor refilling cash) may have to make six trips in a week to the ATM to refill cash.”
Though the frequency of refilling cash in ATMs depends on the area where it is located, agencies usually refill between bi-weekly to per day. “In some areas such as MG Road in Bangalore we need to refill twice a day,” says an official with a cash replenishing agency, not willing to be named. “Typically on a busy day/location we have seen transactions varying from 200 to as high as 600 per day on certain days,” says Gill.
Banks will need to observe the withdrawal behaviour before changing the amount deposited in each ATM. However, refilling ATMs with a higher amount unnecessarily too will not be a viable option for banks.
“Banks do not want to keep more money in ATMs as it is idle cash and increases their cost of funds. Depending on the dispensing pattern, the frequency of refilling cash will have to be increased.
Banks will have to pay more charges, which could be around Rs 300-500 per day (per additional visit for each ATM),” says the official of the replenishing agency.
Also, those willing to withdraw Rs 1 lakh using their permissible debit cards, can’t do so by inserting the card just once.
“Usually banks have Rs 100 or Rs 500 notes. Each ATM can dispense only 40 notes in one transaction. So if the ATM machine has Rs 500 notes as the highest denomination, then you can withdraw only Rs 20,000 in a single transaction and if it has Rs 1,000 notes then one can withdraw Rs 40,000 maximum in one transaction. So to withdraw Rs 1 lakh one will have to insert the card thrice,” says a source.
But ATM manufacturers suggest that a lower withdrawal limit is in the interest of the bank customers. Sunil Udupa, president and chief executive officer of AGS Infotech, which installs Wincor Nixdorf ATM machines and solutions, says, “ATM machines have a limit of 40 notes per transaction as a security limit. There have been instances in Bangalore where people were kidnapped and taken to the ATM. At gunpoint they were asked to withdraw money.
So, it is a security issue and people should prefer a limit that is
small if they do not need to withdraw a higher amount.”
ATM managers too would be observing usage patterns. Antony says, “We need to see the usage pattern. So far we had not been monitoring cash withdrawals for a single card. Now we will have to add that parameter to other cash forecasting tools. So far, salary days, long weekends were peak usage times.”
He says customers may not be impacted as the cash level is monitored by them to avoid inconvenience. “There are softwares that generate low-cash level alerts. We set the threshold limit depending on where the ATM is placed and the turnaround time it will take to replenish the cash,” Antony says.
Cash-recycling ATMs would be a solution, say ATM management companies and manufacturers. In such machines the notes deposited by one customer are again used for withdrawal by another person and this would be able to solve the problem.
ATM manufacturers such as Wincor Nixdorf and NCR have launched such machines that can recycle cash and banks are currently piloting these machines which accept notes without an envelope, check them for quality and verify whether they are fake or not. A bank official said, “We are testing them, but the prices of these machines are high. More competition will bring down prices.”
Mengawade says, “We are conducting tests and in the next couple of months should be able to offer cash recycling at ATMs.” But Antony of Prizm Payments, says, “Usage of cash-recycling ATM machines is a lot easier in markets where the currency is plastic.”