IIMB expert castigates banks for cutting corners to save costs; says Bangalore attack would discourage people from using such technology-driven banking facilities and cultivating banking habits
The ghastly attack on a woman trying to withdraw cash at an ATM in Bangalore has triggered outrage and resulted in strident calls for more security at kiosks. ATMs have been a favorite target of thieves in this city as well as other places in the country. There have been several instances of thieves breaking into ATM kiosks, using welding equipment to unhinge the machines and then lug them into waiting vans. But the daring attack on a customer was the first of its kind. Dr. Charan Singh, RBI Chair Professor, IIMB, answers questions on who should play a role in ensuring safety at ATMs - the police, the Reserve Bank of India, or commercial banks. He also outlines a strategy for safer ATMs.
ATMs are a great convenience, but they can compromise your safety as the Bangalore incident has chillingly revealed. A robber looking for easy prey only has to stake out an ATM in a low-traffic, dimly lit area and bide his time. As someone with considerable commercial banking experience in India and abroad, what are your thoughts on the ghastly incident itself and on repercussions on banking practices across India?
I am also appalled. I have been a commercial banker myself; after serving in a commercial bank I went on to the Reserve Bank of India. So I have seen both sides - as a regulator and as well as a service provider. In this episode, two things are striking: the safety of women - a woman was a victim in this case; and the second, safety norms observed by the banking institution involved. A woman has been attacked inside an extension of banking premises. The questions are: was it an attack on a vulnerable victim (a woman) or did the seclusion of the place - an ATM - trigger the attack? The other thought that comes to mind is: who is going to take care of the victim, her medical bills, and her impaired future. And what is the strategy that we must have in place to prevent instances such as this one. One obvious question that emerges is: why was the shutter left loose so that it could be closed from public view? Whose responsibility was it to ensure that the shutter, once opened, was secured? These are micro-issues but they involve lots of thinking and strategic planning. Implementing this across the country is not going to be easy.
I would like to mention some statistics. In India today, we have more than 1,26,000 ATMs. Of these ATMs, 64,000 ATMS are onsite - i.e. they are on the premises of the bank, and about 62,000 are off-site. Why I mention these numbers is because the ATMs which are on-site, there is a check post or security guard who is attending the bank branch. As far as foreign banks are concerned, they generally have ATMs that are off-site. As far as private sector banks are concerned, most of the ATMs are also off-site. But as far as the public sector banks are concerned, most of the ATMs are on-site. Of 79,000 ATMs of the public sector, about 46,000 are on-site. These are two different things: security provided at an ATM which is part of a bank's premises does not incur cost. Off-site, the cost implications are high.
Whether secured by a guard or not, an off-site or an on-site ATM must have security measures in place because a substantial number of transactions take place in ATMs. Nearly 52 crore transactions take place annually in ATMs across the country. We do not have statistics on how many of these transactions are done on-site and off-site. I should mention that statistics on ATMs is not clearly available in India: there is no central repository of such statistics. I should also mention that ATMs are more of an urban phenomenon; only about 10 per cent of ATMs are available in the rural areas.
To summarize, I would say that off-site ATMs certainly need more security and more strategic planning for security and safety of users.
Who should be playing a role in ensuring safety - banks, RBI, police?
This, in a way, involves fixing the accountability and responsibility for security of ATMs. The RBI is basically concerned with regulation and supervision of the banking system. They would give directions. I think RBI should play a role in giving clear directions to the commercial banks as to the venues of setting up ATMs. Why should ATMs be in secluded and vulnerable places? Most of all, the responsibility is of the commercial bank. In this very case, as I just mentioned, why should the shutters have been left open to manipulation? The commercial banks who are transacting business through ATMs are covering their cost. If a customer comes to a branch, the bank incurs cost on infrastructure and personnel but by providing an ATM the bank has reduced its cost. It has a fixed cost in terms of a machine, some servicing cost but overall the transacting cost is much lower than serving the customer in a branch. So, it is the responsibility of the bank to ensure security in and around ATMs. The responsibility is not that of the police. They can't police every service in public domain. Responsibility lies squarely with the bank. Let me give you an example: if an accident takes place within the premises of a bank, it becomes the responsibility of the bank, in my opinion. An ATM is an extension of the bank itself. They should be treated thus. Probably that will make commercial banks sit up and provide better security for their ATMs.
What should be the strategy for safer ATMs?
The strategy has to be seen in the context of India. In India, ATMs have made an appearance about two decades ago. Some strategies that come to my mind, based on my experience, are:
a) Most or all ATMs which are off-site and which are in secluded places need warning sirens right outside the ATM in the street so that any passer-by can help.
b) There should be flashlights outside the ATM that can be operated by a button switch inside the ATM by the victim.
c) Cameras should not just be sitting inside an ATM for recording purposes; there should be cameras outside the ATM tot, to watch who has got inside. And the cameras should be linked 24/7 to the nearest police station.
d) There are standard procedures which are sadly being flouted. For instance, when ATMs made their appearance in India, there were lockable doors. One had to swipe one's card to enter, and once a customer was in, the door would automatically get locked. The ATMs would have restricted space- not more than one person could enter at a time. Over a period of time, the lockable doors have vanished! These days, you can stride into an ATM without swiping your card; in fact 5-6 people can fit into an ATM facility too! I think ATMs should be designed smartly, keeping in view our domestic security scenario.
As far as providing security guards are concerned, it is a double-edged sword. If the guard himself comes with no security/ background checks and if the hiring of guards is outsourced, then it can be counter-productive. There of course is one mechanism: retired army personnel - and most of the army personnel retire at age 35 or 40; they are loyal and very fit and one can depend on them by their very training and character - can be employed as guards at off-site ATMs.
My concern is that in India, banking habits are very difficult to cultivate and difficult to encourage people to undertake banking. People are used to keeping money at home or in the form of gold. They do not like to bank. When we encourage banking, we are also encouraging financial inclusion and we are encouraging people to put their cash in banks instead of hoarding it at home, so it is then very important that psychologically we provide a safe banking environment. One such incident causes such a huge setback to banking literacy that it becomes even more difficult to encourage people who have never done banking previously to bank now. The general refrain would be that banking is not safe, so hold back money at home. Such negative publicity is difficult to erase from public memory. As a strategy we need to strengthen the security environment around ATMs. Banks should take responsibility that ATMs are nothing else but an extension of the bank counter itself.
Is the Karnataka government's threat of summary closure of ATMs because of non-compliance with the security-guard requirement emblematic of muddled thinking? We now hear that places with regulated entry, such as malls and clubs, can now keep ATMs operational even without the now-mandatory guards as the City police have relaxed some security regulations for ATMs, a day after they announced 45 days for banks to secure their ATMs better.
At the end of the day, all responsibility with regard to law and order is that of the government. I think the police are very correct in putting pressure on the banking system. Banks are commercial enterprises and should put security of their branches in order; banks must ensure that their branches do not become a cause of law and order problem or turn into dangerous traps for select citizens. No innocent person who is availing of banking services should be made to suffer. The police are right in making the banks step up security like any other responsible commercial entity. An ATM serves the customer to save time and cost. Commercial banks to cover their cost of providing security measures can probably charge customers an additional user fee. Some countries in the world do charge an extra fee for using an ATM facility.
Do you have any other thoughts on what needs to be done and done fast to restore public faith?
I have two thoughts. First, we have 1,50,000 post offices across India. None of them have ATM machines. I am wondering why can't post offices - urban and rural, which have security guards anyway, have ATM machines installed at their premises? That would provide extension of banking services and inculcate banking habits among people, including rural people. Second, there are credit and debit cards prevalent in the country. Why is the use of credit/ debit cards not extensive? The RBI, the Government and the commercial banks can think of incentivizing use of credit/ debit cards. In case that happens, people won't need to carry cash on them. At present, there is a premium/ a cost incurred when one uses a credit/ debit card. The best way to lower the demand for carrying cash on person is to ensure credit/ debit card usage at points of sale, in shops - small and big without having to pay extra cost. Rather, to encourage use of plastic cards, some token concession should be provided to the customer - card reading machines should be extensively deployed in all types of businesses. In foreign countries, even taxis have card reading facilities, so individuals hardly carry cash on person.
(Interviewed by Kavitha Kumar)
IIMB expert castigates banks for cutting corners to save costs; says Bangalore attack would discourage people from using such technology-driven banking facilities and cultivating banking habits
The ghastly attack on a woman trying to withdraw cash at an ATM in Bangalore has triggered outrage and resulted in strident calls for more security at kiosks. ATMs have been a favorite target of thieves in this city as well as other places in the country. There have been several instances of thieves breaking into ATM kiosks, using welding equipment to unhinge the machines and then lug them into waiting vans. But the daring attack on a customer was the first of its kind. Dr. Charan Singh, RBI Chair Professor, IIMB, answers questions on who should play a role in ensuring safety at ATMs - the police, the Reserve Bank of India, or commercial banks. He also outlines a strategy for safer ATMs.
ATMs are a great convenience, but they can compromise your safety as the Bangalore incident has chillingly revealed. A robber looking for easy prey only has to stake out an ATM in a low-traffic, dimly lit area and bide his time. As someone with considerable commercial banking experience in India and abroad, what are your thoughts on the ghastly incident itself and on repercussions on banking practices across India?
I am also appalled. I have been a commercial banker myself; after serving in a commercial bank I went on to the Reserve Bank of India. So I have seen both sides - as a regulator and as well as a service provider. In this episode, two things are striking: the safety of women - a woman was a victim in this case; and the second, safety norms observed by the banking institution involved. A woman has been attacked inside an extension of banking premises. The questions are: was it an attack on a vulnerable victim (a woman) or did the seclusion of the place - an ATM - trigger the attack? The other thought that comes to mind is: who is going to take care of the victim, her medical bills, and her impaired future. And what is the strategy that we must have in place to prevent instances such as this one. One obvious question that emerges is: why was the shutter left loose so that it could be closed from public view? Whose responsibility was it to ensure that the shutter, once opened, was secured? These are micro-issues but they involve lots of thinking and strategic planning. Implementing this across the country is not going to be easy.
I would like to mention some statistics. In India today, we have more than 1,26,000 ATMs. Of these ATMs, 64,000 ATMS are onsite - i.e. they are on the premises of the bank, and about 62,000 are off-site. Why I mention these numbers is because the ATMs which are on-site, there is a check post or security guard who is attending the bank branch. As far as foreign banks are concerned, they generally have ATMs that are off-site. As far as private sector banks are concerned, most of the ATMs are also off-site. But as far as the public sector banks are concerned, most of the ATMs are on-site. Of 79,000 ATMs of the public sector, about 46,000 are on-site. These are two different things: security provided at an ATM which is part of a bank's premises does not incur cost. Off-site, the cost implications are high.
Whether secured by a guard or not, an off-site or an on-site ATM must have security measures in place because a substantial number of transactions take place in ATMs. Nearly 52 crore transactions take place annually in ATMs across the country. We do not have statistics on how many of these transactions are done on-site and off-site. I should mention that statistics on ATMs is not clearly available in India: there is no central repository of such statistics. I should also mention that ATMs are more of an urban phenomenon; only about 10 per cent of ATMs are available in the rural areas.
To summarize, I would say that off-site ATMs certainly need more security and more strategic planning for security and safety of users.
Who should be playing a role in ensuring safety - banks, RBI, police?
This, in a way, involves fixing the accountability and responsibility for security of ATMs. The RBI is basically concerned with regulation and supervision of the banking system. They would give directions. I think RBI should play a role in giving clear directions to the commercial banks as to the venues of setting up ATMs. Why should ATMs be in secluded and vulnerable places? Most of all, the responsibility is of the commercial bank. In this very case, as I just mentioned, why should the shutters have been left open to manipulation? The commercial banks who are transacting business through ATMs are covering their cost. If a customer comes to a branch, the bank incurs cost on infrastructure and personnel but by providing an ATM the bank has reduced its cost. It has a fixed cost in terms of a machine, some servicing cost but overall the transacting cost is much lower than serving the customer in a branch. So, it is the responsibility of the bank to ensure security in and around ATMs. The responsibility is not that of the police. They can't police every service in public domain. Responsibility lies squarely with the bank. Let me give you an example: if an accident takes place within the premises of a bank, it becomes the responsibility of the bank, in my opinion. An ATM is an extension of the bank itself. They should be treated thus. Probably that will make commercial banks sit up and provide better security for their ATMs.
What should be the strategy for safer ATMs?
The strategy has to be seen in the context of India. In India, ATMs have made an appearance about two decades ago. Some strategies that come to my mind, based on my experience, are:
a) Most or all ATMs which are off-site and which are in secluded places need warning sirens right outside the ATM in the street so that any passer-by can help.
b) There should be flashlights outside the ATM that can be operated by a button switch inside the ATM by the victim.
c) Cameras should not just be sitting inside an ATM for recording purposes; there should be cameras outside the ATM tot, to watch who has got inside. And the cameras should be linked 24/7 to the nearest police station.
d) There are standard procedures which are sadly being flouted. For instance, when ATMs made their appearance in India, there were lockable doors. One had to swipe one's card to enter, and once a customer was in, the door would automatically get locked. The ATMs would have restricted space- not more than one person could enter at a time. Over a period of time, the lockable doors have vanished! These days, you can stride into an ATM without swiping your card; in fact 5-6 people can fit into an ATM facility too! I think ATMs should be designed smartly, keeping in view our domestic security scenario.
As far as providing security guards are concerned, it is a double-edged sword. If the guard himself comes with no security/ background checks and if the hiring of guards is outsourced, then it can be counter-productive. There of course is one mechanism: retired army personnel - and most of the army personnel retire at age 35 or 40; they are loyal and very fit and one can depend on them by their very training and character - can be employed as guards at off-site ATMs.
My concern is that in India, banking habits are very difficult to cultivate and difficult to encourage people to undertake banking. People are used to keeping money at home or in the form of gold. They do not like to bank. When we encourage banking, we are also encouraging financial inclusion and we are encouraging people to put their cash in banks instead of hoarding it at home, so it is then very important that psychologically we provide a safe banking environment. One such incident causes such a huge setback to banking literacy that it becomes even more difficult to encourage people who have never done banking previously to bank now. The general refrain would be that banking is not safe, so hold back money at home. Such negative publicity is difficult to erase from public memory. As a strategy we need to strengthen the security environment around ATMs. Banks should take responsibility that ATMs are nothing else but an extension of the bank counter itself.
Is the Karnataka government's threat of summary closure of ATMs because of non-compliance with the security-guard requirement emblematic of muddled thinking? We now hear that places with regulated entry, such as malls and clubs, can now keep ATMs operational even without the now-mandatory guards as the City police have relaxed some security regulations for ATMs, a day after they announced 45 days for banks to secure their ATMs better.
At the end of the day, all responsibility with regard to law and order is that of the government. I think the police are very correct in putting pressure on the banking system. Banks are commercial enterprises and should put security of their branches in order; banks must ensure that their branches do not become a cause of law and order problem or turn into dangerous traps for select citizens. No innocent person who is availing of banking services should be made to suffer. The police are right in making the banks step up security like any other responsible commercial entity. An ATM serves the customer to save time and cost. Commercial banks to cover their cost of providing security measures can probably charge customers an additional user fee. Some countries in the world do charge an extra fee for using an ATM facility.
Do you have any other thoughts on what needs to be done and done fast to restore public faith?
I have two thoughts. First, we have 1,50,000 post offices across India. None of them have ATM machines. I am wondering why can't post offices - urban and rural, which have security guards anyway, have ATM machines installed at their premises? That would provide extension of banking services and inculcate banking habits among people, including rural people. Second, there are credit and debit cards prevalent in the country. Why is the use of credit/ debit cards not extensive? The RBI, the Government and the commercial banks can think of incentivizing use of credit/ debit cards. In case that happens, people won't need to carry cash on them. At present, there is a premium/ a cost incurred when one uses a credit/ debit card. The best way to lower the demand for carrying cash on person is to ensure credit/ debit card usage at points of sale, in shops - small and big without having to pay extra cost. Rather, to encourage use of plastic cards, some token concession should be provided to the customer - card reading machines should be extensively deployed in all types of businesses. In foreign countries, even taxis have card reading facilities, so individuals hardly carry cash on person.
(Interviewed by Kavitha Kumar)