No slowdown seen in banks’ ATM network expansion plan

The Reserve Bank of India’s (RBI) plan to make ATM usage free from April 2009 is well on track, if business at India’s largest ATM machine manufacturer is anything to go by. A senior official of NCR Corporation says that his firm has not seen any significant slowdown in sales compared with large banks recently. Fears of impending recession and resistance from some banks to co-operate with RBI’s plan had led to market speculation that ATM penetration would hit a plateau in the coming months. “We have not seen any significant drop in demand from banks for ATM machines,” said NCR Corporation India MD India area Pradeep Sen on the sidelines of a press conference.“Embracing technology is perhaps the best way to acquire new customers for banks, especially since there is still demand for cost-efficient solutions in the market,” he added. However, he warns that if the demand drastically slips from here, things can worsen any moment. Last year, large banks had opposed RBI’s proposal to phase out all ATM fees by April 2009 saying that they had made huge investment to build the network, and the proposal would effectively hand over this platform for free to other banks. But banks slowly appear to be falling in line with RBI diktat and sticking on to their aggressive ATM penetration targets, at least, as of now.HDFC Bank country head of retail liabilities Rahul N Bhagat said that his bank had not cut down on targets for either banks or ATMs in the coming months. At a recent press meet, a SBI official, too, had hinted that the bank would stick on to its target of increasing ATMs from the existing 7,200 to 25,000 within three years. Four banks — SBI, ICICI Bank, HDFC Bank and Axis Bank — make up for more than 60% of the 35,000-ATMs in India. Mr Sen said the ATM sharing proposal should not stop from banks from setting up their own ATMs. He points out that banks would have to pay fees for using somebody else’s services. Besides the all important brand visibility is at stake when you allow a customer to visit a competitor’s ATM. “There’s a trade off between the costs of setting up a ATM and these two factors,” he said.Market experts point out that ATM is one of the easiest ways by which banks can contribute to financial inclusion (59% of rural India does not have financial assistance). When costs of setting up a branch are high and prospects of business are uncertain, banks would do best to make use of technology like ATMs, they suggest.