ATM Growth Hinderes in India due to Regulator's Woes

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Hi Friends,

Please find update on ATM penetration in Indian Retail Market and spanners put by RBI. I hope things will improve in next quarter's to come for ATM vendors and Services providers. There was another clitch by Finance Minister "PC" " FM announces to bring outsourced ATM services by the Bank in the Serivce Tax".

The number of new automated teller machines (ATM) opened by banks this fiscal has dropped significantly in comparison with last year, with banks waiting in queue for RBI approval. ATM deployment fell sharply in the last quarter of ’06 after the RBI curtailed the banks’ freedom to deploy ATMs at will. In ’03-04, banks had less than 13,000 ATMs.

A year later the number soared to 18,000. Now, the number is just short of 23,000. From these figures the growth may appear to be consistent. But the numbers are far lower than what it would have been had the ambitious plans by banks to deploy ATMs had fructified. The second tier of public sector banks, a couple of foreign banks looking to expand retail and few of the new private banks had plans to deploy several ATMs in major cities.

This fiscal too, there have been significant deployments with over 4,000 machines put up by banks during the first three quarters. However, in the last quarter after RBI’s guidelines came into force, the number of deployments have fallen to around 750.

The central bank’s guidelines almost equate off-site ATMs with branches since most branch transactions can be replicated in an ATM. With interconnectivity, ATMs had reduced banks’ dependence on branches had come down. IDBI Bank, which had announced plans to deploy 500 ATMs by March, could have only 350 in place. ABN Amro, which had ambitious plans has been able to put in place around 100 machines.

ICICI Bank, which launched its 1,000th ATM in ’02, doubled its network in the next two years. However, since then the network has witnessed only creeping growth. Officials say that banks’ ATM deployment plans have not plateaued but they are waiting in queue for the central bank’s clearance.

According to sources, RBI is worried that ATMs are getting clustered at urban areas. While State Bank of India with its network of 6,700 has gone into semi-urban and even rural areas few other banks have followed suit. ATMs, which were introduced into the country by foreign banks were popularised among the middle class by new generation private banks. But the explosive growth happened only after public sector banks got into the act in the last three years.

Besides SBI, Canara Bank has also crossed the 1,000-ATM mark and Corporation Bank is getting close with over 800 ATMs. Punjab National Bank and Union Bank of India also have over 500 ATMs. Citibank also grew its network aggressively last fiscal when it almost doubled the number of machines. Now, the second tier of public sector banks, which have only started, want to have a large network in urban areas, where they are losing customers.

RBI wants banks to share more in urban areas so that a situation does not arise where there are a number of ATMs in the same street. Bankers say that the central bank is also facing pressure on currency notes since several machines still require crisp bills.