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Banks brace for cash flows, in talk with ATM operators for smooth transition

The government’s move to demonetise Rs500 and Rs1,000 notes also push up logistical costs for banks as lenders have to send the cash loading agencies more frequently to load cash into ATMs

business Updated: Nov 09, 2016 16:34 IST
Beena Parmar

Mumbai Banks are gearing up to meet the large cash needs to replace about Rs 14 lakh crore worth of cash available with public in the discontinued denominations of Rs 500 and Rs 1000 currency notes beginning Wednesday.

Banks have started coordinating with ATM companies to replace Rs 500 and Rs 1000 notes with Rs 100 or below.

According to the Reserve Bank of India, the total outstanding currency in circulation in the Indian economy as on October 28 stood at Rs 17.77 lakh crore. RBI’s annual report says that out of the total Rs 16.64 lakh crore value of bank notes in circulation as on August 5, 2016, as much as Rs 14.18 lakh crore, or 86.4%, consisted of Rs 500 and Rs 1,000 notes.

In terms of volumes, out of the total 9026.6 crore banknote pieces, 1570.7 crore were Rs 500 notes, while 632.6 crore notes were Rs 1,000 denominated, i.e. about 24.40% of notes.

Navroze Dastur, managing director, NCR Corporation, India & South Asia, one of the top ATM operators in India, said: “We are coordinating with banks as there will certain switch level changes, all ATMs denominations settings will require changes, need to pull out Rs 500 and Rs 1000 notes, need to be loaded with Rs 100 or Rs 50 if it can be permitted.”

The switch level changes will instruct ATMs to change it pre-set denominations of Rs 500 and Rs 1000 to Rs 100 notes when a withdrawal takes place till the time period suggested by the banks and government.

Typically, per ATM, 2,500 notes can be stored and each bank has one cassette of Rs 100 and Rs 1,000 notes each and 2 cassettes for Rs 500. So, technically, an ATM can store over Rs 50 lakh but on an average banks put about Rs 25-30 lakh in an ATM depending on the transactions in the area of the ATM.

“Now with changes in the configuration, we can store only about Rs 1 lakh or so. But the limit on withdrawal of Rs 2000 per card will offset the capacity limitation.

This will also increase logistical costs for banks as lenders have to send the cash loading agencies more frequently to load the cash into the ATMs.

Bankers are still trying to figure out how to handle the flood of currency that will float into their branches in the remaining days of the week.

Many banks have drawn up plans to order note-counting machines. SBI plans to use its large network of cash deposit machines to full capacity to handle the notes.

“We have handled demonetisation earlier and will do so again…We will strive to restock ATMs at the earliest and make them operational. Govt has given enough exemptions to ensure urgent needs are met. We will work round the clock to ensure that customers have a smooth experience,” SBI chairman Arundhati Bhattacharya said.

Dastur said that it will not be a smooth process “but we are talking to RBI and banks on what we need to do and how things will shape up.” With new notes in hand, cash deposits will also need to be tuned accordingly. India has about 15,000-20,000 cash deposit machines.