BackIBA suggests tougher norms for safe cash transport to ATMs
The cash replenishment agencies are unhappy with some of the norms as they increase the firms' overheads
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Mumbai: Every year, India’s banks lose about ₹ 50 crore to thefts while cash is being transported from one location to another, estimates the Cash Logistics Association of India (CLAI). The amount may not be large in comparison to the ₹ 15,000 crore in cash transported on a daily basis, but the cases of loss are on the rise, prompting the regulator and the industry to explore ways to make cash transport more secure. The CLAI is an alliance of cash management and transport service providers.
“Frequency of loss events involving ATMs and cash vans have gone up to four a quarter, from one a quarter in the last four years. So, we clearly need standard norms regarding security and eligibility of companies running these services," said a senior CLAI official, seeking anonymity.
A 14-member working group set up by Indian Banks’ Association (IBA) in October 2013, at the behest of the Reserve Bank of India (RBI) has suggested far tougher norms for cash replenishment agencies (CRA), which transport cash from banks to automated teller machines (ATMs).
In a report submitted in the first week of September, the group recommended that an agency owning and operating up to 50 cash vans must have a minimum financial net worth of ₹ 5 crore. For an agency with over 500 vans, a net worth of ₹ 100 crore has been recommended. Mint has reviewed a copy of the recommendations.
An e-mail sent to the RBI on Tuesday seeking comment remained unanswered.
Currently, the biggest firms in the market are CMS Info Systems and SIS Prosegur (India), which together control roughly 80% of the market, according to the industry association. There are a total of 12 firms operating in this space.
“ ₹ 15,000 crore in cash is being carried by these firms but there are no clear standards in place for the firms that are operating in this segment," said Rituraj Sinha, managing director, SIS Prosegur.
The working group also suggests that a minimum of two armed security guards and two ATM custodians accompany a driver and a loader, with each cash van carrying over ₹ 5 lakh.
Additionally, the vans must also have a global positioning system (GPS) and controlling technology to disable or immobilize the van when required.
Employees at CRAs would be required to go through 80 hours of compulsory training with annual refresher courses. Police verification of the employees would also be required before hiring them.
The working group also recommends that CRAs, which hold cash worth ₹ 10-100 crore overnight for banks, must have vaulting facilities as per RBI specifications. Round-the-clock electronic surveillance and monitoring by armed private security guards, along with safety gear like firefighting systems, smoke detection systems and emergency lighting are also recommended.
The industry, however, is not exactly enthusiastic about these norms.
CMS Info Systems, the largest cash management company in India, along with the Confederation of ATM Industry (CATMi) has sent a dissent note to the IBA, objecting to some aspects of the report.
“Beyond regulating financial strength of companies, there is a critical need to develop robust frameworks for risk assessment in various geographies, and leverage risk management processes and technology-based solutions to address these, rather than take the approach the guidelines seem to be built on," said Anush Raghavan, assistant vice-president and head (risk management) at CMS Info Systems.
Raghavan explains that most of the security requirements of CRAs are outsourced to private security agencies, which are facing a severe shortage of trained armed guards and gun licences themselves. Employing two armed guards per van, as opposed to deploying guards based on the amount being carried, would increase the cost substantially.
At present, there are roughly 8,000 cash vans being operated by the cash management industry, where each van does two shifts. Two guards per vehicle for each run would require over 30,000 guards, while the industry has only about 12,000 trained armed guards available, according to the CLAI official.
The dissent note also opposes the requirement to have minimum two custodians, who operate the ATMs, in each van due to the additional cost involved.
“The norms, if formalized, will definitely have an impact on our margins in the short term. However, the cash management industry will have to take a long-term view and take this as a bitter pill since these will standardize services across companies and make way for a level playing field to the industry," said Sinha of SIS Prosegur.
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