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Stricter norms for ATM cash handling companies likely

MUMBAI: A spate of robberies involving cash vans, including those by delinquent employees, has made the Indian Banks Association (IBA) come out with minimum eligibility criteria for cash replenishment agencies (CRAs) - security companies that are responsible for stacking ATMs with cash. An IBA panel has also recommended a new protocol for cash transport and suggested installation of GPS and remote immobilizers on vans. It has also urged the government to grant arms licences to CRAs, which is denied under exiting laws.

The recommendations come from an IBA working group on outsourcing of cash management services by banks. The panel was set up after the RBI asked the association to look into all issues related to outsourcing of cash logistics by banks. Before the proliferation of ATMs, banks handled cash internally. However, banks have been outsourcing the job to third parties in recent years.

The group has made four main recommendations. The first pertains to having minimum eligibility standards for CRAs. It also wants banks to use pre-qualifying criteria for outsourcing such services. Second, compliance to minimum eligibility standards by CRAs should be monitored through an accreditation system. It has also proposed guidelines for risk mitigation in ATM operations, reconciliation and dispute resolution between banks and CRAs or 'cash in transit' companies.

"The guidelines will ensure more uniformity to the sector and entry of only standard players in the industry. Setting stringent rules is likely to weed out non-serious and inefficient operators from the segment. Clarity on operating standards shall ensure mitigation of risks significantly, pushing operators to work towards safer and more efficient operations for banking sector," said Rituraj Sinha, president, Cash Logistics Association of India. Sinha is also managing director of SIS Prosegur, a cash logistics company.

If the panel's recommendations are accepted, banks will need to ensure that CRAs have a net worth of Rs 5 crore for operating up to 50 cash vans. The net worth requirement goes up progressively with the number of vans. A company that operates over a 100 cash vans will need a net worth of over Rs 100 crore.

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