State-run banks led by State Bank of India to install 40,000 ATMs

MUMBAI: State-run banks led by State Bank of India plan to install 40,000 automated teller machines, or ATMs, across the country to widen their reach in what will be the biggest such exercise by local lenders. This time, all the government-owned banks will join hands to install what are known as white-label ATMs, which are not owned by any single bank and where the entire operation is outsourced.

Last week, SBI sought offers from vendors for setting up 40,000 ATMs, twice the number the bank currently has. SBI owns the maximum number of ATMs in India. Of the 74,743 ATMs in the country, SBI had 20,084 at the end of March 2011, according to a survey by Atos Worldline, which specialises in electronic payment services.

Recently, a tender was issued on behalf of all state-run banks within days of the finance ministry directing them to adopt a unified approach on installing ATMs. A senior finance ministry official told ET that the government was in talks with the Reserve Bank of India for issuing guidelines on white-label ATMs.

The new ATMs will be rolled out in a phased manner in 2012-13. At least 25% of the 40,000 ATMs will be installed in the first quarter, 40% in the second quarter, 25% in the third quarter and the rest by the end of the fourth quarter. A banker, who did not want to be named, said the ATMs will be installed across geographies, with each geography being allotted to various state-owned banks depending on their presence in such locations.

Going by the tender issued by the SBI, the selected vendor will have to enter into separate agreements with each individual bank. There is resistance from the RBI to approve white-label ATMs since they are owned by non-banking entities, which means they do not fall under the purview of the banking regulator.

In case of any dispute between such entities and banks, the RBI may not be able to step in given the ambiguity on the regulation of such entities. RBI's worries also stem from the fact that white-label ATMs do not carry the brand name of any bank, making it difficult for a customer to know whom to contact in case there is a problem with the cash-dispensing machine. A bank officer said to resolve this dilemma, there is a proposal to make the lead bank in an area responsible for the ATMs in their region.

The lead bank will pay the vendor and take ownership of the ATM, the officer said not wanting to be named. Bankers are scheduled to meet senior finance ministry officials next month to work out the detailed plans relating to the installation of the ATMs. White-label ATMs may provide stiff competition to private banks, such as HDFC Bank, ICICI Bank and Axis Bank, which are among the top-five banks in the ATM segment. SBI has the largest share in the pie, with 27% of the ATMs, followed by Axis Bank and ICICI Bank, with 8% each. HDFC Bank, Punjab National Bank and SBI's associate banks have a share of 7% each.

Source: EconomicTimes