I have attended quite a few meetings called by the regulator to discuss and find out ways and means to avert frauds faced by ordinary citizens in their banking transactions. The present piece is on how serious these meetings are and how the problem is approached.
The meetings are conducted on a serious note with the regulator showing due concern on the plight of hapless customers who suffer due to the fraud. But it has been my experience that the regulator expects the banks to do all the pioneering work to prevent the frauds. Very seldom I have experienced a novel approach suggested by the regulator to tackle the problem.
It has been seen that the reactive approach is employed most of the time. The trail left by a trickster is analyzed and measures are devised to prevent leaks which the trickster harnessed successfully. Mostly these are afterthoughts and nobody could really anticipate. Every time a new method of fraud is discovered and the same analysis method is undertaken. By the time the preventive measures are taken, such methods are no longer used by the tricksters. Everyone becomes wiser after the event and scapegoats are searched to blame.
Let’s see one example. A person lost his money at an ATM as someone could trick him to reveal the PIN, a four digit number. Now the search starts for the answer as to how the PIN was revealed, even after the PIN was revealed what were the mechanisms employed by the bank who deployed the ATM to safeguard the interest of the customer, whether the CCTV camera and recording were working, whether any guard was deployed at the ATM, how the machine kept alive even after the customer was gone, what is the time-out limit, etc. etc. These all are the processes which are being followed from the time ATMs are deployed and frauds are taking place. None of these questions ever helped in designing a system where such frauds no longer committed. Frauds of such nature are continued unabated and the numbers are only increasing. CCTV cameras are working, better quality footages are ensured, guards have been deployed, awareness campaigns sustained for NOT to reveal PIN of ATM cards, the software is redesigned to mitigate the time-out situations, hardware of the machine reconfigured so as to not to reveal the PIN while typing, and so on and so forth. But the problem exists even today and it is multiplying.
So what needs to be done? To me the answer is simple. Let’s try to make the attempt by the trickster unattractive, non-remunerative, not worth taking the risk, things like that.
When people used to store their valuables at home, the burglaries were a common problem and a kind of everyday incident. Then safe deposit lockers came into practice. Every bank started offering the service and people literally leaped at the opportunity. Now the thief knows that hardly any valuables in the form of gold or jewelry are kept at home, at least at urban centers. So theft of such type decreased. I am not saying the thefts are not taking place. But thefts for such items definitely decreased. The burglar now knows that most households won’t keep valuables at home. The attempt has become unattractive and non-remunerative for the burglar, not worth the risk.
So how do you employ the same logic in case of ATMs? We as bankers know the various limits for cash withdrawal from ATMs. It starts from Rs.10000 to even Rs.100000 depending upon the type of customer. We all know that one can use one’s ATM card at any bank’s ATM subject to certain limits. I don’t understand the logic behind high cash withdrawal limits. In this age of digital banking, EDC machines everywhere, less-cash campaigns etc., why such high withdrawals are needed. A priority customer gets a high cash withdrawal limit. In practicality, a priority customer hardly withdraws cash for his use. He mostly uses cards for payments, be it at petrol pumps, shopping malls, restaurants, multiplexes etc. I am a priority customer of a bank and at times I carry not even Rs.100 cash with me as I know the cards are sufficient and efficient enough to manage my payments. Even for an ordinary customer carrying a debit card the facilities are same. Why would he need Rs.10000 at one go? Especially in urban places, the EDC machines are almost at all shops. In my locality, even the kirana shop, the pastry shop and the medicine shop maintain EDC machines. This forms a habit and the habit has to be inculcated. Lower cash withdrawal limits would make the attempt unattractive to the trickster. There is no need for fixing various limits. Cash is needed sometimes to buy bus tickets, train tickets, to pay the road side eateries and for petty expenses. The amount needed for these transactions are not enormous. So a limit of Rs.1000 to Rs.5000 would be enough. Lower the cash withdrawal limit and you may see the change.
The matter can be made further unattractive for the trickster if the ATMs are selectively made inoperative depending upon the area. In certain areas the law and order situation is pretty bad. The ATMs in these areas may be made inoperative during the danger hours, say from 10 pm to 6 am. Added to this, if at all some ATMs at these areas are to be kept operative, lowest possible withdrawal limits may be fixed. I have heard that in Brazil, in certain areas the ATMs allow withdrawals for 100 in local currency, barely enough to pay the taxi bill to a nearest busy place. Similar limits can be fixed for the ATMs in such areas where the user would just need minimum cash at that hour.
The low cash withdrawal limit will have a positive effect on spending habits of the user. More EDC machines used means more tax compliance, more revenue for the authorities, more ease in doing business for the shops, less cost on cash management, less crime due to low cash volume at vulnerable points like petrol outlets, shops, higher low cost funds in the bank accounts to the benefit of bankers….so many such positive results. Low cash withdrawal limits also will curb the black money menace.
There is need for some change in rules. Banks typically allow free withdrawals of cash from ATMs upto a certain number of transactions. It is 4 to 5 in a month. The customers tend to withdraw more at one shot to avail the benefit of free withdrawals. If we go for less limits, more number of free withdrawals would be required. So the limits of free withdrawals need to be increased.
The low limit will also be beneficial to banks not only in terms of higher CASA balances maintained by customers but also keeping low cash balances in the ATM machines. From my experience I know a huge amount is cash is kept in ATMs all put together every day. The per ATM cash limit is derived on the basis of usage at a particular area. Cash in ATMs are dead asset for the banks. Less cash in ATMs means less dead asset in the books of the banks and that means more profitability.
In a society, crime and punishment live together. No one can eliminate crime altogether. We as civil society can attempt to minimize the impact and the loss. Making a crime un-remunerative or unattractive is an effort we should try. Lower limits of cash withdrawal facility at ATMs can be one such effort. There could be some inconveniences but as we are all advancing towards a less cash environment, we can forecast a day when there would be no ATMs dispensing cash.
Is anyone listening?