Some automated teller machines will shortly be independent of banks as Euronet India kick starts with the first set of 25 independent, non-bank branded ATMs by December 2006. Today, all ATMs are either owned or branded by banks as being part of their own network.
Euronet will enter into ATM sponsorship arrangements with Industrial Development Bank of India, Citibank, Standard Chartered, Centurion Bank, Development Credit Bank, Lord Krishna Bank and Dhanalakshi Bank.
Euronet's project will be on the lines of "convenience" ATMs in the US. Independent ATMs are owned by or known by the brand names of the service providers.
The service provider then charges individual banks a transaction fee for every cash withdrawal undertaken by its customer. The transaction fee will be passed on to the customer by the respective bank as is the case today when a customer of one bank uses the ATM network of another bank.
The Reserve Bank of India has no problems with banks outsourcing ATMs owned and operated by service providers.
However, the regulator wants to ensure risk mitigation and settlement processes are in place before it gives a formal nod, said Loney Antony, managing director, Euronet Services India, the subsidiary of Nasdaq-listed Euronet Worldwide.
The RBI has already stated that it will issue guidelines on outsourcing of banking services by the end of the month. The guidelines will seek to improve regulatory oversight for risk management and also spell out prudential norms.
Euronet Worldwide is a provider of secured electronic transaction solutions to enable clients' customers acess to personal finances and undertake secure payment transactions. Euronet has over the last four years also set up a pan-European network of 2,000 independent ATMs.
Antony said Euronet would go for cash-dispensing ATMs rather than full-fledged ATM machines as it would drastically reduce the cost of setting up an ATM centre.
The cost of ATM machine and doing the interiors per centre is Rs 10-12 lakh (Rs 1-1.2 million). The use of cash-dispensing ATMs will reduce the cost to less than Rs 5 lakh per centre.
RBI is considering a model where the independent ATMs will be owned and branded by the service provider, but the licence for it will be held by a sponsoring bank, said Antony. RBI wants the licence to be owned by an entity that is within its regulatory ambit, he added.
He was speaking on the sidelines of a press conference, where Dena Bank announced having joined the "Cashnet" shared network of 5,000-plus ATMs across 200 cities. Euronet has provided the switching infrastructure for the Cashnet ATM network.
The use of Euronet branded ATMs will entail payment of a transaction fee by bank customers. The fee would be much lower than the Rs 25 per transaction charged at ATMs set up by Euronet for partner banks, Antony said.
Euronet also has set up at its own cost about 1,200 ATM, which have been outsourced to various banks. The ATMs are branded as ATMs of the respective banks, even though the entire facilities are owned by Euronet.
The lease agreements for ATM sites are also signed by Euronet. It has entered into contracts with the banks for setting up 400 more fully-owned ATMs.
