The title might seem not-so-relevant to a Banking & Finance Blog like mine. Isn’t it? But, as with many topics covered in this blog, this one too is related to the Indian banking industry.
Have you ever gone on a trip to any rural or semi-urban area of India? During such a trip, have you ever faced the difficulty of not being able to find an ATM to withdraw cash? I have been in such situations multiple times and most probably you would have too. This post is about some good news about this situation…
Why can’t we find ATMs in Rural Areas?
Operating an ATM involves a lot of money. You need some space to set up the machine, a security guard to safeguard the machine, electricity, computer networking etc. Banks accept this cost of setting up ATMs in cities and posh areas because, the number of customers who use an ATM in a city area is high and adds a lot of business value to the bank. But, if the same is the case with an ATM in a rural area, it is not cost effective for banks. That is why you cant find many bank ATMs in rural areas.
An Interesting Stat: There are nearly 90,000 ATMs in India. Of which approximately 80% or more are in Cities and Urban Areas.
So, what is this Good News?
The Good News is:
The Reserve Bank of India has allowed non-banking entities to own and operate ATMs across India.
Yes, if you want, you can purchase 10 ATM’s and install them in rural areas in your locality. That’s great news, isn’t it?
How will these ATMs work?
These ATMs will not be owned by any bank. Any bank ATM Card that is tagged to a service like VISA or MasterCard or any other service will be able to use the ATM and withdraw cash. These ATMs will be linked to all banks in India and will be able to service cash withdrawal requests of all customers irrespective of what bank they have an account with.
Why would someone want to set up an ATM Machine?
This will be a business opportunity for the individuals/corporations setting up those machines. The RBI has given permission to those entities that set up these private ATM Machines to charge for their service. So, anyone who uses the ATM Machine to withdraw cash will have to pay a fee that will go against the service which will be the profit for the company setting up those ATMs.
What are the Restrictions in Using these ATMs?
There are a few restrictions that need to be remembered before using such ATMs. They are:
1. Every transaction in such “Neutral” ATM is charged. The fee is payable by the customer to the owners of that ATM
2. This usage does not come under the “5 transactions in other bank ATMs” ruling of RBI. Your bank too may charge you for using the Neutral ATM
But, if you think about the situation, you are stuck in a rural area and need some cash, would you think paying lets say 100 or 200 rupees to withdraw cash as more important than getting the cash to meet your family’s cash requirements?
Who can Apply to Set Up these ATMs?
Any non-banking entity that wants to set up these ATMs must have a minimum net worth of Rs. 100 crores at the time of application. Also, they must maintain their net worth throughout their operation. This is one of the pre-requisites to receive the approval from RBI.
Will this be a Successful Idea?
I have seen such Private ATMs in USA and other developed Nations. They are very successful and are even set up in urban and city areas. However, this is a novel idea for a country like India. Only time will tell if this will be successful, but I think this will be a successful business idea because:
1. ATM Penetration in rural and semi-urban areas of India is very poor. Chances of us finding an ATM in such areas is very slim. So, if private non-banking entities set up an ATM Network, it will be very useful for customers
2. Though these private non-banking entities may charge you a fee for providing the service, once competition heats up among private players in setting up these networks, the fees may come down and become cheaper
All in all, this is a very good development and hopefully it will be Successful!!!