Podcast | Editor's Pick of the Day - Cashless ATMs: Any Time Mayhem?
Madan Sabnavis, chief economist, CARE Ratings, wrote a piece on November 14, 2016 in Firstpost that summed up the dizzying chaos of the early days of demonetisation. Among other things, he described the stress and heartburn caused by the disruption of Automated Teller Machine (ATM) services in just one part of the country. A metro like Mumbai.
He wrote, "The ATM story is still bizarre. On the 11 November one moved in a radius of 4 km between Andheri East and Vile Parle East (in Mumbai), which houses around 25 ATMs. Several ATMs of Kotak Bank and YES Bank were closed, with shutters down. The security guard said that cash was not received.
SBI was taking only deposits. ICICI Bank claimed money was exhausted while HDFC Bank had no one to talk to as the main shutter was down and locked. PNB, Canara, Karnataka Bank, OBC and United Bank had not received stock of money. The only ATM which could give cash at 11 pm was IDBI Bank which probably had currency as it is located in a quiet place."
What was the issue here? Well, his conversations with bankers and security personnel revealed the following. All banks did not have currency chests and did not have access to money. They needed to get money from the RBI and the central bank appeared not to have the stock which meant basically that there was a shortage of currency notes.
"Once a bank gets the money it should have the wherewithal to handle it and disburse to branches. All do not have these facilities. The ATMs need to be reprogrammed to dispense specific denomination notes of fixed quantity and also ensure that the same card cannot be used twice in a day. There is a limit to it as it involves a physical exercise. There are over 2 lakh machines that need such attention. The outcome is also that once these machines are to provide a larger quantity after a pre-specified date, then they have to be reprogrammed. It is not surprising that these notes do not fit and the result is long queues."
The estimation of the cost incurred from realigning ATMs, transportation of cash, security, besides the printing of new notes and destruction of old mites, was pegged in the article to anywhere between Rs 30,000 crore and Rs 40,000 crore. This of course excluded the loss of GDP.
Plus, said the piece, announcing limits on withdrawals at ATMs or exchanging of currency sent out panic messages that the system did not have enough money.
The conclusion by the author? The problem with India and the schemes implemented here is that most of them are formulated in the precincts of institutions with less knowledge of reality. Execution has always been our Achilles heel, and the attitude is always one of jugaad, he wrote.
In this Moneycontrol podcast, we will discuss another ATM related crisis looming on the horizon. One that has already sent alarm bells ringing far and wide.