MANILA, Philippines - Manufacturers and service providers for the automated teller machines (ATM) operating in India are hoping that smaller Indian banks, along with their larger private and state-run counterparts, will drive future growth for products and services in one of the world’s fastest growing economies, as the nation’s banking regulator pushes ahead with its financial inclusion agenda.
With the Reserve Bank of India (RBI) allowing up to five free ATM transactions to consumers on any bank’s ATM network and small cash withdrawals from points of sales (POS) terminals across the country, industry participants are expecting growth in self-service banking.
“We have seen take-off from a lot of cooperative banks deploying ATMs; that wasn’t the case in India earlier,” Manjunath Rao, country manger for sales in India for global ATM manufacturer NCR, the biggest provider to Indian banks, said.
ATM deployment started in the late 1990s purely as a branding strategy by larger state and privately run banks, with the goal of targeting India’s burgeoning middle classes with their surging disposable incomes.
Smaller banks had sensed competition from their bigger private and state-run counterparts as early as 2002-03 but profitability remained a concern for them. This is now changing.
“Their balance sheets [initially] could not support the deployment of such a large number of ATMs,” says Amrish Rau, country manager of First Data, India. “The new regulatory environment now provides a fantastic playing field for them. They don’t have to stretch their balance sheets and at the same time they are able to service their consumers.”
“As we look at financial inclusion and a rural foray, a lot of banks will be able to bring in more of the rural and semi-urban population into the banking stream,” says Raja Gopalakrishnan, group managing director for Asia at Fidelity National Information Services, which has co-operative and community banks as members in its BANCS ATM network in India. “The smaller banks are going to serve as a catalyst through the bigger ones that they might hub into,” he says citing the example of regional rural banks in India that hub a lot of smaller district co-operatives under them.
Currently, India has 45,000 ATMs, or an ATM density of 35 units for every million people in the country, less than half the ATM density of China.
Comparing these figures with other countries in South Asia and around the region, Nepal has 11 units per million people, Pakistan 34, Sri Lanka 104, Indonesia and the Philippines both 134, Australia 159, Malaysia 432, Singapore 506, Thailand 655 and Taiwan 1,336, according to data from The World Bank and CGAP.
Even with India’s low ATM density, the ATM representation of its co-operative banks is the lowest among all financial institutions: with a total of 1,721 urban co-operative banks with 659 ATMs according to latest RBI data, a majority of which are concentrated in the western part of the country, it is clear that many co-operative banks do not have any self service channels at all.
India’s top 10 banks account for as much as 85 percent of all ATMs deployed in the country, said. — TAB