“Changes are products of intensive efforts” — Muhammad Yunus in his 2003 book Banker to the Poor: Micro-Lending and the Battle Against World Poverty
Nachiket Arya caught the flashing light of a mobile alert on his cell phone that was perched on the dashboard. The PM was delivering an unscheduled speech to the nation. Nachiket was a trifle surprised but tuned into his news channel app. It was 7.30 p.m. The Prime Minister began with the usual takes on corruption and then went on to say, in Hindi, “It has therefore become imperative to take firm steps. Today 8th November midnight, the Rs 500 and Rs 1,000 currency notes in circulation, legal tender nahi rahenge… these denominations will be legally worthless….” Nachiket was stunned. In that empty car, there was nobody he could exclaim to.
As the next few key words flowed through, Nachiket pulled up to the side of the road and sent messages to his team to listen in. “This will have a huge impact on our work. Make notes, jot thoughts, we will talk in 20.” Within seconds he received eight ‘Aye Sir!’, ‘Sure boss!’, ‘Will do.’
Nachiket knew he would first need to understand the finer aspects. He sent a message to his next in command Madhav Vaidya, “PM declares demonetisation. Did you hear? We will need to shut ATMs immediately. Process, process, process. Call soon.”
Now, Nachiket sat there by the silent street, listening to the speech. Then, he called his brother Abhay (they stayed on separate floors of a two-storeyed house) and said, “Abu, I won’t be joining you guys for dinner. Looks like a very long night. But will call you in a while to update you on a situation you need to get acting on.”
Nachiket then fixed a conference call for 9 p.m. with the operating team. He had an hour to get back to the office. En route he stopped at the HDFC ATM on Bagget Street behind his office, to withdraw cash as he had none. There was a queue of 8-9 people. Everyone was withdrawing Rs 400, multiple times. He heard them reason out to each other, “Boss don’t put demand for Rs 500; You will get a Rs 500 note. So…” And they took him through the strategy too. But by the time it was Nachiket’s turn to draw money, the ATM was empty! Nachiket was amazed at the speed with which people had reacted to the news.
The queue had grown by a few more behind him and he heard their anxiety. Many people had to pay rent on the 9th-10th of the month as their salaries were credited on the 7th of every month and the credit became accessible on the 8th or 9th. But others before them had completely broken down the ATMs drawing absurd quantities of Rs 100 notes perhaps to pay salaries to domestic staff and rent. Nachiket knew the next few days was going to be chaotic.
With 15 minutes to go for his con call, Nachiket called Abhay again. “You watched the news? …So, you know what’s in store. No, no, don’t worry I will guide you. But it is raging like fire already. I think ATMs will go dry in an hour. Main Bagget street ATM is empty, will you believe? Let me deal with my nightmare, which has just begun!”
Abhay: What is the trigger for this?
Nachiket: Don’t know, but the PM has been training his guns on black money for a long time. I just received an intimation from RBI and NPCI (National Payments Corporation of India) saying that ATMs have to be shut by midnight. They will also be shutting the ATMs from the back end.
Abhay: What does that mean for us?
Nachiket: Immediately a cash crisis, I guess? I don’t even know where to begin. Have called all my team. But am thinking of people drawing money in the night. Poor things… But you need to … I know! Exactly! I too am thinking of your father-in-law. I will draw some 5,000 in 100s and bring it home, I suggest you drive down to Chikharde and take the cash for him. He is also a bleeding heart looking after the villagers. So, maybe I will get you 10k?
Abhay’s father-in-law Mr Kesav, Anna, as they called him, looked after his fields in Chikharde, with the help of the villagers. He also guided them in their farming practise and looked after their health and education to the extent he could. After his wife passed away 15 years ago, Anna decided to stay on the farm, by himself. A life of labour is what he chose. Abhay stayed in touch and even visited him once a month with his son Raghuveer. (Abhay’s wife was a guest lecturer in one of the foreign universities and travelled out significantly.)
Abhay: Oh, boy, I can see that Anna sahib will have problems. But they do have a Sahakari Bank there, I guess he will go there… I will drive down to the village tomorrow and take whatever cash you can bring home tonight. Let me too sprint across to our ATM next door and draw what I can.
Nachiket was the CEO of Sahas, a company he had set up over a year ago. Sahas had licences to set up 2,500 ATMs and these were in the ‘less than 20,000 population’ villages. Setting up a business like this appealed to him as it actually took growth into villages and homes and tangibly improved the quality of life of the rural Indian. After 18 years of selling performance sports shoes and then Cola, he put his savings into this when the RBI decided to open ATMs in villages.
It was opportune, for the government had launched the Jan Dhan Yojana, to open over 250 million new bank accounts, predominantly from the under banked sections of rural India. These accounts were ‘no frills’ accounts. The intent was to get the unbanked population into the banking fold. All these people were provided with ‘RuPay’ cards, which they would use on these private ATMs to draw their money kept in banks in the far away towns or cities. What was more, all citizen benefits like NREGA payments, gas subsidies, fertilizer subsidies, etc., were planned to be routed directly to end beneficiaries through their Jan Dhan bank accounts, thereby empowering the rural Indian even more.
This whole plan necessitated deployment of more ATMs in the rural areas. In a way, the germination of white label ATMs (WLA) was linked to this thought. The WLA industry started seeing increased transactions on their ATM network from PMJDY (Pradhan Mantri Jan Dhan Yojana) customers.
Nachiket had been delighted. His investment was wise and timely.
But today as he watched the confusion translate to more confusion, he knew he needed to sit and plan his moves gently. He messaged Abhay, “I am rattled yes; but I need to think. The business is new and worse, the consumers are new too! The product is new, the habit is new. I will be late. Don’t wait up for me. I need to think beyond shutting ATMs. I need to think about keeping them open ….”
Sahas, a business for which money was the raw material, served the last mile customer. These small traders and farmers valued the ATMs being there in their neighbourhood.
Nachiket whose mantra had been financial inclusivity for all, now star-ed out of his office window, shutting off the office TV and depending only on his mobile alerts. But he kept glan-cing at the tweets that flowed like the Ganga, albeit not as purely, for these were now getting angry and loud. When the team came on the conference call at 9, the first thing Nachiket told them was, “We have Rs 180 crore sitting in our ATMs. Our first task is to shut down all our ATMs at 12 midnight, as we cannot dispense any more 500s or 1,000s. So get cracking, talk to the switch folks to figure out the best way to cut off all ATMs.”
In short, that night the city did not sleep. At least not the people who managed and ran ATMs. And definitely not Nachiket’s team.
The next task was also to plan the next two days, especially how they could move all old notes from remote locations at the lowest cost and the quickest time, “as any delay would cost us lots in interest!” said Nachiket.
Easier said. But the execution was going to sap them. Over 2,000 ATMs sat across the country in most remote villages. Travelling to each of them, unloading the money and carrying them back to the banks safely (even if they were invalid tender, they yet had exchange value, albeit for a limited period) and getting the credit for the return was not going to be short of a week’s work, at the least. But to be fair, the NPCI had made it a little easier by switching off ATM transactions from the back end. (The NPCI is the umbrella body that governs and manages all retail transactions – transactions between two consumers, between consumers and businesses, or between two businesses, involving the use of retail payment instruments or access devices. Additionally and importantly, the NPCI is credited with the issue of a domestic card payment network named RuPay, India’s response to Master and Visa. Over 220 million Indians own RuPay cards.)
The interest cost was the paradox and, at some level, pernicious too. As long as the cash sat in their ATMs, Sahas would incur interest, even if the currency was declared invalid. The onus of collecting the cash and returning to the bank was what would stem the interest cost to the ATM managing companies.
After a night of planning, calling, groaning, all ATMs were shut. But the real backbreaker: as long as the monies were not received back into the cash system by his supplying banks, Nachiket and Sahas would be paying interest on the monies. “The faster I bring those old notes back to the banks from where the cash was first taken and deposit them, and get the OD reversed by my funding banks, that is when my interest cycle stops,” said Madhav as he watched the hourly report being filed in by the team.
Here is where one must pause to examine the complex manner in which money moved across banks, across states, across villages and how the cash is fed into the ATMs. And what all this meant to Sahas and Nachiket.
Sahas had costs and revenues like any organisation. Its raw material was money and its customers were anyone using a debit card of any bank and its suppliers were banks from who he had lines of credit as well as cash supplying banks from whom he ‘bought’ currency.
To understand the magnitude of work, logistics, controls and risk involved in what ends up looking like a simple ‘I-put-card-into-slot-and-machine-coughs-out-money’: Sahas had lines of credit from half a dozen banks. So, every morning Sahas would draw from the OD, transfer say, Rs 100 crore worth of funds to various cash supplying banks (that is, banks from whom he had contractual agreement to just buy cash) and they, in turn, would ‘sell’ him currency. Then, Sahas India’s Cash Management Agencies (CMA) would pick up the Rs 100 crore of currency notes from these supplying banks, go to the multiple ATM locations in the country, and load the ATMs.
Sahas’s revenue was earned from transactions by ATM users. Hence when an ICICI card holder used one of Sahas’s ATMs, the transaction is routed via NPCI to ICICI where the transaction is authenticated, and Sahas’s ATM receives the go-ahead to pay the ICICI card holder/swiper. On a daily basis, there were some Rs 40 crore withdrawals across all Sahas ATMs. Sahas got back these Rs 40 crore via a settlement from NPCI. That was when the cash returned to his system along with an interbank interchange per transaction. So, if an ICICI customer swiped his card on a Sahas ATM, ICICI would pay or Sahas Rs 15 for that transaction. That was really Sahas’s revenue .
But a system that worked quietly like clockwork, needed stringent controls and checks. Over the next few days as the CMAs counted the cash and took it back to the banks, the anxiety that would plague Nachiket was: Will the physical cash tally with the balance as per the NPCI switch meter? And this constituted a significant nightmare for Nachiket. And until all this was signed, sealed and delivered, his interest meter would tick away furiously. This was all the more critical as Nachiket knew that his ATMs will be shut till he managed to source new currency. So, when the revenue would be zero, incurring an avoidable interest cost was crucial.
Madhav Vaidya wondered why they were being charged interest on the idle cash that was verily invalid legal tender. “How can you calculate interest on a currency that is redundant? We have not declared the money invalid, it is money rendered idle, nay, redundant by the system. So why must we pay interest?”
Fair or unfair, Nachiket would need to retrieve the cash from 2,000 dispersed locations. It was not like a bank reversing a transaction with one book entry. This was a logistical nightmare and thankless and unforgiving on top of that!
While physical cash verification was done on a periodic basis, the control Nachiket had on total money sitting in the ATMs was limited. The entire responsibility of the cash sitting in ATMs was that of the CMAs. The CMA would reconcile the bank receipts and settlements with the switch balance and be assured that all monies tied up correctly.
On that day, the switch balance said Rs 125 crore, which meant Nachiket would have to get physical balance confirmations from all his ATMs in the country that should total Rs 125 crore. Plus, eventually when the CMAs went and collected physical cash from each ATM, and deposit the same at various banks, the tally should be 125 crore! Not a rupee more or less. Unlike a company cash box, they could not physically verify cash across the 2,000-odd ATMs on a daily basis! They would have to rely on the reconciliation statements. The point being that bank-owned-ATMs had built in systems that delivered this process. But the WLA had to fend for itself.
Through all the drama playing out around him, a ridiculous yet relevant anxiety consumed him. What if Kartik, the head of cash management, told him, ‘Sorry, we have Rs 110 crore not 125. Rs 15 crore is missing…!’
But what was now staring him in the face was, “That interest meter will keep ticking till I hand in all Rs 125 crore to the banks who gave me that money. And handing in the money will happen only when Kartik waves the green flag to say 125 equals 125.”
As was his nature, a small utility screen opened somewhere in his head to calculate 10 per cent on Rs 5 crore for 3 days, while his questioning mind raised a ‘what if’ question: What if Kartik gets 105 and not 125?
Meanwhile Kartik called to narrate to him the process once again so that Nachiket was aware of the time involved, “I have to first count the money sitting in the ATM, then I will tally it with the Switch amount, if it does not tally I am dead, and if I am not dead, then I take those currency notes, go back to the bank branch from whom we took the money, the bank will count the money, and then the bank will credit our account.”
Sitting there in the night talking across four mobile phones as the news from his app kept spewing grimmer and grimmer scenarios, while others cheered the PM on for taking the black money bull by its horns, Nachiket realised Kartik’s situation was worse than his.
Therefore simply put, Kartik would have to, at the first level, physically go to the ATMs, count, check, enter, tie up and then only hand the cash to the banks. It was nerve wracking even thinking of it.
But worse lay in store.
Around 3 a.m., when Nachiket reached home, with Rs 10,000 in Rs 100 notes for Anna’s Primary Health Centre and the farm wages, he was surprised to see Abhay in the living room watching old re-runs of the India-NZ match that he had saved on Tata Sky; and Raghuveer sprawled on the floor.
Nachiket: What are you doing here? I would have sent you the money in the morning!
Abhay: We are leaving at 5 a.m. to beat the traffic. Meanwhile Anna has done something terrible.
Nachiket waited to hear, confident that he had seen the worst already.
Abhay: You know he had Rs 25,000 for the harvest? It happens that he was unable to exchange money at the Sahakar bank, who also told him they cannot pay his pension till the next month as there is no cash…. How heart breaking is that bhau! So, Anna went to the money lender in the next village and changed his 25,000 for Rs 22,000.
Nachiket: Oh, no!
Abhay: Anna said he tried going to Barshi to the bank; but Surabhi, the cow, was in labour and there was no way he could leave her and go anywhere!
Nachiket could see that getting the ATMs up and running again was high priority. That would mean getting more 50s and 100s to feed into the ATMs and reassuring the confused, agonised rural customer.
But there were more mountains to climb as he would realise soon. Two days later, when Kartik collected the cash from 20-odd ATMs on one route, and went to Bank X (his first stop) to return the cash borrowed from them, he reeled! The queues at the banks boggled the mind. The bank staff who would earlier call out to him, crack a joke and offer him a sip out of their own tea cup, now waved him away in desperation. They had no time to look up! They had been working round the clock since the previous morning!
And no, they had no staff to devote to counting Kartik’s Rs 28 crore, and counting that much money did take a lot of time. “Do we deal with 1,000s of irate customers in a queue that is only growing longer or do we deal with one guy with crores of rupees?”
Everybody sitting in the bank, everybody, was doing cash work. In some places, even the tea boy was enlisted to double verify cash. So, when Kartik reported this,
Nachiket’s heart sank some more: this too was going to add to his interest cost.
Where should he begin and what was to be his priority? Interest first or customer? If he had to reactivate the ATMs, (the drama of ‘no more cash’ would come after a week, but right then, Nachiket believed the official statement that all would be well in a week), Then I have to depend on these cash supplying banks to buy currency notes. But those banks had no currency with them! Why, they all threw up their hands and told Nachiket, ‘Don’t call us, we will call you, we have no money. Don’t even talk to us till we get money. We don’t even have currency to feed our own ATMs. That is our, priority anyway, isn’t it?’
Madhav: We are like an institutional sale for them, not crucial for business.
Nachiket: But my biggest challenge is, I have to reactivate my ATMs! I need that cash! Today, just now, all my ATMs are shut!
The next few days as he struggled with settling balances with banks on the one hand and finding ways to feed his ATMs a little now, a little then, Raghuveer messaged him from Anna’s village to say, “Dau! Anna has a difficulty. They were saying the new Rs 2,000 is coming. It has been so many days, the ATMs are empty!”
Nachiket: Raghu, please tell Anna I am very sorry. We are trying very hard. Things must look up in two days.
Raghu: Dau, take heart. Anna is facing difficulty, no doubt, but he has been sharing with the village folk the story of the war with black money. It is amazing how these folks here are so excited. They see black money as something seriously evil and bad and some are even offering prayers in the Ram Mandir here! So, chill dau!
Nachiket: Thank you, my friend, more glitches are popping. But change is like that. It can never be magic. So, now we are seeing that the new currency sizes are different. This adds to the complexity. That is why the new Rs 2,000 note is not yet out. We have to now go back to every single ATM, and change the cassettes that hold the notes. The guide rails must be made a little smaller. That process is on. It is not a single switch operation. But the change has started. The OEM (original equipment manufacturer) has already started changing the cassettes. Nobody even knows, but how swiftly they have begun to work! It is a technical thing, it is not like you ship out a power cord and consumer fits it. Somebody needs to know how to do that. And it has to be done physically, it is not like transferring money from my account to yours. And this needs to get done across 2.20 lakh ATMs!