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Friday, November 18, 2011

Spurt in ATMs as banks look to shore up fee-based income

The relaxation of norms for using ‘other bank' ATMs by the Reserve Bank of India in 2009 seems to have encouraged banks to set up more ATMs across the country in order to garner fee-based income, acquire new customers as well as to service the existing ones.

There has been a 24 per cent growth in the number of automated teller machines set up by banks to 74,505 ATMs as on March 2011, according to statistics available in the latest ‘Report on Trends and Progress of Banking in India' released by the Reserve Bank.

The central bank had initially completely waived off transaction charges for using ‘other bank' ATMs for a customer. However, later this was restricted to five transactions (financial and non-financial) a month.

The ‘Indian Payment Card Industry Survey 2011', conducted by Atos Worldline suggests that the number of ATMs is likely to increase to over 92,000 in 2011-12.

Banks consider ATMs to be an integral part of their branding, service delivery and expansion strategy. Therefore, most of them are enriching their ATM service offerings and increasing their ATM base.

The spurt in the number of ATMs can also be attributed to banks' attempt to divert customers away from branches to alternative channels to enhance efficiency.

Public sector banks seem to have taken a lead in the expansion process by installing more number of ATMs. More than 65 per cent of the total 74,505 ATMs belonged to the public sector banks as at end-March 2011, the central bank data said.

Setting up an ATM entails a cost of about Rs 5 lakh. “It is worth making this investment as an ATM brings down the overall transaction cost to a great extent. Moreover, we earn interchange revenue which adds to our fee-based income,” said Mr S. L. Bansal, Executive Director, United Bank of India.

Off-site ATM

The Reserve Bank report, however, suggests that the percentage of off-site ATMs to total ATMs witnessed a marginal decline to 45.3 in 2010-11 from 45.7 in 2009-10.

“From the point of view of banking penetration, off-site ATMs have more relevance than on-site ATMs. Out of the total net increase in ATMs last year, only 44 per cent were off-site ATMs,” the RBI report said.

Explaining the reason for the lower percentage of offsite ATMs, Mr Aspy Engineer, President, Direct Banking, YES Bank, said, “Public sector banks have a huge branch network so their natural choice will be to set up an ATM at their branches first and then to look for offsite ATMs.”


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