The 'Swadhan' shared payment network service promoted by the Indian Banks' Association in 1997 for its member banks to share their ATMs is being dismantled.

The IBA management committee last week decided to withdraw itself from running the network from the end of calendar year 2003.

"The IBA took the leadership in setting up the network at a time when banks were not taking technology initiative on their own. Now separate group of banks are setting up their own network and IBA does not need to be there," said an association executive.

Swadhan has connected 32 banks -- public sector banks, private sector banks, foreign banks and co-operative banks -- with over 1000 ATMs (both online and offline) spread over 82 centres across the country. It was started with the intention of reducing the huge investment that is being made by the banks to deploy ATMs in different locations.

India Switch Company had won IBA's mandate in early 1997 to service the Swadhan network via a 'Base 24 Switch' for five years. The contract expired in January this year.

"We took a close look at the issue and made some changes in the conditions of the service provider. Now, the fees will not depend on the number of transactions at the ATMs. The new arrangement will come to an end on December 31. This will give the participating banks time to make their own arrangements," the source said.

"Banks are now striking alliances for ATM network. Besides, the spread of debit card also has an impact on the ATM usage. In this context, Swadhan has lost its relevance," pointed out a senior banker.

The Swadhan SPNS, promoted by IBA in 1997, has proved operationally uneconomical. The average per day per ATM transaction on Swadhan is only around three. As against this some of the private sector banks in the country boast an average per day per ATM transaction of around 200.

The Swadhan network lacks economy of scale. ATM/debit cards issued by the all the 32 live-banks put together under the SPNS  is three million.

In contrast a private sector bank like ICICI Bank, which has its own Switch and is on an aggressive ATM installation drive, alone has issued 3.2 million debit cards and 1.9 million ATM cards on a standalone basis.

Further IBA's possible egress from SPNS should be seen in the context of most banks preferring to own their 'Switch', the software that interfaces between the ATM and the bank's data centre (server) so that authentication and approval of transactions is possible.