Cost of ATMs dips as banks expand network

Anubha Ghosh

Bangalore, Aug 8: The cost of automated teller machines (ATMs) has dropped sharply by almost 50 per cent over the past two years as more and more banks in the country expand their ATM networks. Accordingly, ATM rentals too have taken a dip, and across the banking sector, players are eyeing tie-ups with other banks for ATM sharing.

Says Canara Bank chairman and managing director RV Shastri: "The cost of an ATM has fallen from Rs 14 lakhs (fixed cost) to Rs 8-9 lakhs over the past 2 years." This has been largely due to innovations in the hardware as well as the ATM software.

Besides, with greater ATM usage and increasing number of transactions, rentals too are dropping. On an average, it costs the bank Rs 20 per transaction on the ATM. However, banks charged around Rs 50 per transactions as rental charges. This fee is witnessing a fall. Vysya Bank president V Raghunathan said: "Over the last one year, ATM rentals have dropped sharply to around Rs 30-35 per visit." The bank plans to install 40 ATMs by March 2002 all over the country and interconnect all the ATMs for anywhere banking by June 2002. Currently, the bank has just six ATMs.

As per industry benchmark, an ATM must get at least 200 visits per day to reach the break-even. But with volumes increasing and better software hitting the market, the rentals are continuing their downward movement. Also, explained Robin Roy, head (retail banking), Vysya Bank: "ATM is an instrument offering a 24-hour visibility which an extension counter cannot provide." This has prompted many public sector and private banks to enter into ATM sharing arrangements with other banks. The State Bank of India and its associate banks are working on a proposal - ‘Swadhan’ where all the member banks will share the ATMs of each other.

Earlier, the move was not popular with the customers. However, the falling rentals are expected to change the scenario. Explained State Bank of Mysore managing director M Sitarama Murty: "The new generation customers and corporates cannot be ignored. Certainly, the PSU banks will try and have more ATMs." SBI and its associate banks together have around 1,100 ATMs.