The industry, however, outlined that operations cost may increase in the short-term but would improve efficiency and reduce fraud in the long term.
The Reserve Bank of India (RBI) issued guidelines in April asking heads of all banks including cooperative banks to follow standards such as net worth of the outsourced service provider and their sub-contractors in cash management logistics should not be less than Rs 100 crore.
Besides, guidelines prescribed that such cash logistic companies should have a minimum fleet size of 300 specifically fabricated cash vans with armed guards.
Banks have been directed to ensure that the net worth criteria is met as on March 31, 2019, (audited balance sheet to be submitted to the bank concerned by June 30, 2019) or at the time of renewal of agreement, whichever is earlier.
“We as an industry welcome the intervention by RBI to establish minimum operating standards in cash logistics. The RBI guidelines are benchmarked with global standards. Currency management is regulated in most major economies by the central bank,” SIS Group managing director Rituraj Sinha said.
While in the short term they are likely to push up cost of operations, in the long term they will save money by improving efficiency and reducing fraud, he pointed out.
“The guidelines should be seen from the perspective of enforcing security, risk mitigation and moving towards international operational best practices in currency management which is one of the core objective of the RBI,” industry association Cash Logistics Association president Anush Raghavan said.
Besides, Raghavan said it will help optimise velocity of cash and generate more jobs in the sector as the companies need to deploy more manpower to take care of enhanced security aspects that impact the banks and end consumers.
“We welcome the move by the Reserve Bank of India and Ministry of Home affairs. These guidelines represent a progressive step towards regulation in this industry and cash logistics management is an important element of banking products and services. The adoption of these guidelines will fortify the existing framework and driving sustainable growth in the sector,” he said.
The growing incidence of frauds, skimming and looting of cash vans called for a guidelines for regulating the sector. During demonetisation, the RBI took note of the fact that cash logistics is the completely outsourced operation and banks do not operate cash vans, but these cash vans are carrying Rs 12,000-15000 crore of public money each day.
Therefore, RBI had constituted a high level working committee under an executive director to seek opinion from banks and industry before framing the guidelines, Sinha said, adding, a lot of thought from top officials and industry leaders has gone into framing these. DP MR MR