India needs to dismantle ATMs to make digital payments a success
Arundhati Bhattacharya, the CEO of India's largest public sector bank SBI, speaking on an NDTV show shot during Davos 2017, said the day the ATM withdrawal limit was hiked to Rs 10,000 per day, digital payments registered a sharp fall.
She was only articulating the disquiet among the cognoscenti - the mushrooming of ATMs in cities is both wasteful and encourages the use of cash despite the provision of digital payments. Dismantle 50 per cent of the ATMs, and you are encouraging online transactions. Na rahega baas, na rahegi baansuri, as the idiom goes.
There are some 2,20,000 ATMs in the country and the bulk of them are located in urban areas.When it comes to swiping machines, also known as POS machines, the call is normally taken by the shopkeepers.
However, recently, the central government placed the onus on the banks with which most establishments have current accounts by urging that the dealing bank push for the installation of swiping machines at retail shops across the country.
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| The limit on withdrawals per day and week would continue to discourage cash dealings. |
To start with, it has urged that banks add 10 lakh such machines by March 31, 2017; a daunting exercise given the existing number of such devices at the time of issuing this directive stood at 14.6 lakh.We need fewer ATMs and correspondingly more swiping machines to take forward the idea of digital payments on a record scale.
Even though digital payments on a monumental scale may be some years away, the quantum leap in use of cards to make payments using POS is eminently achievable.
Here's where the SBI chief's observation holds well - people who took to digital payments during the initial days of demonetisation are choosing cash over online transactions today.
The availability of large number of ATMs tempts people to withdraw large sums, especially in cities and towns. In rural areas, of course, the story is vastly different.
Debit cards are also known as ATM cards in our country because they are used to withdraw cash at ATMs as well as swipe at POS-equipped vends besides online transactions.
Their dual use cannot be wished away, but the usage pattern can be shaped by government policies and directives.
In the US, cards are by and large used for swiping at POS terminals. In India, we use them largely for ATM withdrawals. This proclivity must be reversed. Can doing away with half of the ATMs in metropolitan cities do the trick?
Let's read the signs. The limit on withdrawals per day and week would continue to discourage cash usage. But this would only scratch the surface of the problem given the weekly limit of Rs 24,000 is generous.
On the other hand, additional levies would only prove counterproductive - the ordinary citizen may shun banks and go back to cash dealings.
In the short run, the government's push for digital payments with limited discounts, such as those offered at petrol bunks for using cards to buy fuel, is the way forward. In addition, bringing down the number of ATMs would be a more muscular, yet much needed move to wean people away from cash.
Banks must take a leaf out of telcos' books - let's try ATM pooling a la tower pooling.