Branchless banking in India, the ATM way

Banks are playing a major role in ATM adoption, particularly in the area of personal banking

The Automated Teller Machines, popularly known as ATMs, have found their way in India thanks to the initiative of foreign banks when they opened their branches here. With RBI’s restriction on the opening of new branches by foreign banks, the deployment of ATM machines came handy to foreign banks for better coverage and penetration. With world class technology brought in by them, ATMs became a popular mode of banking for the Indian public. The new private sector banks took the lead from thereon and augmented their brick and mortar banking with the branchless banking through wide network of ATMs.

The public sector banks though late entrants to this field are not far behind. As at the end of March 2012, out of 95,686 ATMs installed in the country, 58,193 ATMs were deployed by the public sector banks. The share of State Bank Group is impressive and has a tally of 27,143 ATMs across the country as on March 31, 2012. As on June 2013, the total number of ATMs set up by all scheduled commercial banks have increased to 1, 21,617.

To encourage the spread of ATMs for building national payment infrastructure, relaxation was announced in the Annual Policy Statement 2009-10 to allow scheduled commercial banks (SCBs) to set up offsite ATMs without prior approval of the Reserve Bank.

Gone are the days when customers make a beeline before the cash counter of the banks for cash withdrawals. Now, they are able to withdraw cash 24x7x365 through the ATM network of the bank where they hold their accounts and through ATMs of other banks’ ATMs as well. To extend the facility of use of ATMs of one bank to the customers of other banks, banks have entered into bilateral or multilateral arrangements with other banks to have bilateral or inter-bank ATM networks.

Apart from withdrawal of cash, customers are benefitted by other features /services which can be availed through the ATMs like mini statement, balance enquiry, cheque book request, bill payment, airline ticket booking, payments of institution fee, mobile top up, etc.

Though initially RBI allowed unrestricted withdrawal from any of the banks without any fee, now it has been restricted to a total number of 5 times in a month from the savings bank account. If operated for more than five times in a month, a fee of Rs 20 is being levied. This free withdrawal upto five times is not available to current account customers.

Till last year, only banks were permitted by RBI to set up ATMs as extended delivery channels. Now, RBI has permitted non-bank entities incorporated in India under the Companies Act 1956, to set up, own and operate ATMs in India. Such ATMs are called White Label ATMs (WLAs)

With the increase in use of banking technology tools, there are certain attendant technical glitches too. Due to loss of communication, there are chances that the customer account will get debited but cash would not have been dispensed. All banks have put in elaborative mechanism to detect such non-successful transactions and reimburse the customers. As a part of speedy redressal of such ATM complaints, RBI has issued instructions that if the customers complaint if not resolved within 7 days from the date of complaint, banks have to pay Rs100 per day of delay till the date of affording the credit. But if the customer complains after 30 days from the date of transaction, compensation of Rs100 per day does not apply.

Banks are playing a major role in ATM adoption by customers in the domain of personal banking. Banks have expanded the scope of banking to anytime, anywhere banking through interoperable platforms provided by the authorised shared ATM Network Operators / Card Payment Network Operators. At present, with most of the banks having migrated to the core banking solution platform, the ATM Channel brings down the transaction cost of the bank substantially.

Though ATM machines are user-friendly, some of the naïve customers have been tricked by confidence tricksters and have lost money primarily because of sharing the PIN number to the strangers. Some gullible customers avail assistance from the next customer revealing their PIN numbers. In their own interest, customers need to keep the PIN numbers confidential and change their PIN numbers frequently. As ATM operations have proved to be a win-win situation both for the bank and the customer, banks are bullish on migrating their customers to this Alternate Delivery Channel. It is imperative that the customers are well aware of the do’s and don’ts instruction being issued by the banks from time to time in respect of the ATM transactions to make ATM banking a secured one.

(Venkata krishnan is working as General Manager with State Bank of Hyderabad. The views expressed in this article are his personal views)