Financial Daily from THE HINDU group of publications
Monday, Jan 27, 2003
Money & Banking
ATMs more a drain than gain?
Raja Simhan T.E.
CHENNAI, Jan. 26
BANKS, both the private and the nationalised ones, may be going in for automated teller machines (ATMs) in a big way. But if industry sources are to be believed, the return on investment from these ATMs could be poor.
The reasons include poor patronage by customers; especially old people who prefer dealing with officials rather than with ATMs. The location of the ATM also plays a role in customers using them, according to industry sources.
For a good return on investment, the average transaction should be 250-300 per machine per day. However, in a majority of ATMs the number is not even half that per day, while in some it is less than 100. Only in a few machines of major private sector banks do the transactions reach above 300 per machine per day.
As it stands today, the total installed ATM base in the country is over 6,000 (4,000 online). The total cash movement through ATMs in India is about Rs 40,000 crore every year. Indians on an average withdraw anywhere between Rs 1,500 and Rs 4,000 per ATM transaction, say industry sources.
An internal research of Tata Consultancy Services (TCS) shows that investment by banks in ATMs is not effectively used and most of the ATMs are unutilised.
ATMs in rural area reported more transactions than those in urban areas, Mr N.G. Subramaniam, Vice-President and Head, Banking Industry Practice, TCS, told reporters recently.
The company's research revealed that not many ATMs had been deployed in the rural areas, he said.
Says Mr B. Suresh Kamath, Chairman and Managing Director, Laser Soft Ltd, the Chennai-based IT firm specialising in banking sector, "ATM is a big waste of money".
Perhaps one more VRS (voluntary retirement service) could help banks reduce their employee strength and divert customers to use ATMs, he adds.
An official at Karur Vysya Bank, which has over 25 ATMs, agrees that the number of transaction at ATMs is not impressive. The location of the ATM is important and a lot of survey needs to be done before installing the machine. The cost of an ATM installation varies between Rs 8 lakh and Rs 12 lakh (if done by the bank itself), he says.
A majority of the bank's ATMs are in non-metros. The response is good with an average of about 150 transactions per day, he adds.
More than the location, the response to the ATMs will depend on the number of cards issued and the number of branches networked, say industry sources.
According to Mr Nagraj Mylandla of the city-based Financial Software and Systems (P) Ltd, which provides e-platform solution for the integration of front-end delivery channels such as ATMs and POS (point of sales), the ATM use in the country was booming.
The number of transactions through ATMs would go up once the banks accept other bank's cards too, he says. Some of the banks have started doing this, he adds.
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