Search the Internet          Tips  Sites: Finance, Investment

Private banks plan ATM sharing to ramp up revenue

George Smith Alexander

Private sector banks are looking to sharing their automated teller machines, installed across the country, with others such as foreign banks, peer private banks and co-operative banks.

New private sector banks -- ICICI Bank, UTI Bank and HDFC Bank -- which have over 1,000 ATMs in the country are now seeking to share them with other banks to increase transaction volumes as well as earn more revenue.

These banks have used their ATM channel to supplement their lower branch base compared with nationalised banks. The ATMs have helped these banks lower their transaction costs.

HDFC Bank has tied up with Cosmos Co-operative bank and Dena Bank for sharing ATM network. It has already set up ATMs in Cosmos Bank premises where customers of both the banks can use the HDFC Bank ATM.

UTI Bank is in talks with other banks to share its ATMs. ICICI Bank was planning to have a similar tie up with Corporation Bank.

Banks are going full steam in this direction since the Indian Banks' Association's Swadhan network in Bombay does not seem to have caught the fancy of many banks.

Says ABN Amro Bank's chief executive Ramesh Sobti, "We will not participate in Swadhan. A group of banks will need to get together to share their ATMs and we are looking at tying up with other banks."

Says H N Sinor, ICICI Bank's managing director and CEO, "It is a question of managing the network. The interchange fees do not take care of our transaction costs. In an ATM-sharing deal we have to at least cover our transaction cost and make some money out of it."

"At present in India there are two standard models of ATM sharing -- the MasterCard and Visa network and the Indian Bank Association's Swadhan network. We are essentially trying to set up a third model by tying up with other banks so that their customers can use our ATMs. It would encourage utilisation of our ATMs to the maximum," says UTI Bank senior vice president Hemant Kaul.

The advantage for the smaller banks, which have tied up with bigger players is that their customers can access the ATM network across the country. The advantage for the bigger players, on the other hand, is that these banks get revenue from sharing their ATMs. The public sector banks will have major advantage if they are able to join this ATM-sharing network as setting up of ATMs is a capital-intensive business.

"For most of the public sector banks, it will not be profitable to set up a large network of ATMs as they already have a large branch network. They are setting up ATMs perhaps to retain the existing customers," said Sinor.

The new private sector banks such as UTI Bank, ICICI Bank and HDFC Bank have been able to get in a large number of customers (50,000-60,000 new customers per month) because of their large scale off-line ATM (installed outside the branches) expansions.

MasterCard and Visa have tied up with domestic banks for using their (banks) ATM network. If an international customer uses any of these cards for withdrawing cash, he would be charged around $2.14 for every transaction while for a domestic cardholder the charge is Rs 50 for every transaction.

The charges for the customer for using the Swadhan network is Rs 25. In case of an emergency, customers seem to prefer using these cards even though transaction charges are levied. This has become an important revenue source for the banks.

Adds Kaul, "The interchange income has become a significant revenue earner for the bank. This year we would like this income to become a major revenue earner for the bank."

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report