WHY THE CASH BUSINESS IS LOOKING FOR A COP

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The cash logistics industry is set to witness a boom over the next two years. But why are industry biggies asking to be regulated ?

"The risks in this business are substantial " says Rituraj Sinha, Managing Director of SIS Prosegur, one of the country's larger cash logistics providers. Such providers perform a critical, if relatively unnoticed, function in the banking industry of physically moving large amounts of cash between bank branches or of ensuring that ATMs of banks remain topped up. The risks are not only external , a van with a few crores of cash on an open road is tempting target, but internal as well.

One of the contrary, the industry is looking forward to a boom over the next two years. There are currently, as installed base that has built up over the lase two decades on the back of the growth of private sector banks and the heavy investments made by public sector banks as well. In addition, the banking industry may also see an influx of new private sector players following the move by the Reserve Bank of India to hand out new banking licences.

The country will add another 1,00,000 ATMs over the next couple of years. It is a forecast that others in the industry back up and , if this roll out actually happens , the country will add as many ATMs in the next two years as it had added in the last 20 years.

Largest players, through the Cash Logistics Association, have now approached the RBI, asking it to set minimum norms of practice, as well as set a bar in terms of the size of players allowed in the business. Proposals include requiring players in the business to have a minimum asset base of Rs. 50 crore, with a facility to service 10 centres across India. The Association has also asked the RBI to specify minimum standards to handle and process cash. If such standards do get introduced by the central bank, it could lead to significant winnowing of at least smaller players in the industry.

CASH SECURITY

One indication of the kind of standards that the industry is looking at is on display at SIS Prosegur's new cash processing centre inOkhla, Delhi. The high secure centre is built to handle about Rs. 2000 crore of cash per day, though it currently handles only around a tenth of that amount. The process of distributing cash between ATMs begins with the vault manager at the processing centre, who is the onle one who should know which ATM gets how much cash. A route map is planned the previous night, with all vehicles being tracked by GPS to ensure they don't stray from their locations.
Such practices are still quite rare in India. The industry's move to get the RBI to introduce regulations for cash management seems aimed at ensuring that banks don't have that choice.

Source: The Economic Times magazine April 07-13, 2013. Article by Avinash Celestine.

V.SENTHILNATHAN