Why ATMs are running out of cash so fast

Naina Rajat, a resident of Gurgaon, went to a nearby ATM at 11 am to withdraw cash. Rajat had to wait for over two hours for her turn to come.

“I was, however, lucky as I could withdraw Rs 2,000 from the ATM, but by the time I left the place, I was exhausted,” she said. Recounting her nightmarish experience, Rajat said the demonetization exercise “should have been better handled.”

The country’s banks struggled through the day to cope up with serpentine queues with most ATMs going dry, no adequate replenishment and disgruntled customers, even as they extended their working hours and opened up many temporary cash counters.

Sources said while banks had made arrangements to address this issue, the public sector lenders—which have the largest network in the country—are short staffed by at least 25-30%.

Management of ATMs, on the other hand, has been outsourced. In most cases, delivery and replenishment of cash is done by cash logistics companies and not by the banks themselves.

Why this chaos?

On a normal day, Rs 10-15,000 crore is replenished in the country’s ATMs. On Friday, the rise in demand for cash was unprecedented. The 8,800 cash vans used to fill up ATMs were first used to flush out the old currency notes and only on completion of this exercise, the new currency notes could be filled up at the ATMs.

Besides, with the maximum currency notes now comprising smaller denominations—primarily of Rs 50 and 100, the ATMs are getting filled while the value of cash stored in each of the machines is significantly lower.

Read: Banks struggle to handle panicked customers, ATMs run dry within hours

The average transaction per ATM is estimated at about 125 in a day. But more than about 800-1000 people queued up at ATMs at the metros to withdraw cash.

“The cash logistics companies are doing their best, the staff have been working 24X7 but this kind of situation has never been experienced ever, we are monitoring the situation very closely...it needs to be highlighted that the surge in demand is unprecedented,” Rituraj Sinha, president, Cash Logistics Association and co-chair, FICCI Private Security Sector Committee, told Hindustan Times.

There are over 2 lakh ATMs and over 1,31,000 branches across the country, of which 20,565 belong to the private lenders.

“We have been saying there will be some problem in the first few days. There are complicated logistical issues involved in delivering such huge piles of cash at bank branches and ATMs across the country. It will take some time for the situation to come back to normal,” a senior finance ministry official, who did not wish to be identified, said.

The official said the government and the Reserve Bank of India had capped the withdrawal limit from an ATM at Rs 2,000 keeping this in mind. “To ensure that many people as possible manage to get cash, a restriction limit of Rs 2,000 was kept,” the official said.