Mumbai: State-run lenders, which account for about 75% of the Rs 64 trillion Indian banking industry, are seeking to protect their share by following their technology-savvy private sector rivals and offering options beyond branch banking to customers.
The top two state-run banks —State Bank of India (SBI) and Punjab National Bank (PNB)— have increased the number of ATMs aggressively in recent years, adding more of the devices than branches. IDBI Bank Ltd too has done so, although for a different reason—it has a relatively small branch network.
Going by the latest figures available, the State Bank group had 24,651 ATMs as against total branches of 17,913 in March and PNB had 5,050 ATMs against 4,855 branches. IDBI Bank had 1,370 ATMs and 806 branches. Larger, new-generation private sector banks such as ICICI Bank Ltd and HDFC Bank Ltd already have an extensive ATM network.
Public-sector banks may have their problems, but they’re also setting up more ATMs than their private sector rivals in a bid to draw customers.
“Public sector banks have realized that alternative channels are more efficient (than the branch model),” said P. Pradeep Kumar, deputy managing director, information technology (IT), at SBI. “Lack of availability of core banking (at ATMs) was a hurdle earlier but this has been resolved now.”
Out of the total ATMs that the State Bank group has, 42.8% or 10,547 are at off-site locations or away from the branch, the data showed.
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Traditionally, private and foreign lenders have been using alternative banking channels such as ATMs to increase reach and bring down operational costs. State-run banks have begun following this trend only recently.
Banks do not need Reserve Bank of India approval to set up off-site ATMs. Customers are allowed to use ATMs of any banks up to five times a month for free. This has acted a catalyst for rapid ATM expansion, bankers said.
In March, Axis Bank Ltd had 6,270 ATMs, nearly five times the number of its branches while ICICI Bank had 6,104 ATMs compared with its branch network of 2,523. Overall, commercial banks in India have 74,505 ATMs and 74,130 branches. Of the total ATMs, nearly 45% operated outside bank branches. Banks are keen to rely on alternative banking channels mainly due to the cost effectiveness of running such units. According to senior bankers, banks typically spend around Rs 15,000 to Rs 20,000 per month to maintain an ATM. A normal branch with three officers could cost anywhere between Rs 60,000 and Rs 1 lakh or even more, depending on the location.
“An ATM costs at least Rs 4 lakh but you have to shell out much more if you want to set up a branch,” a senior SBI official said. He did not want to be named as he is not authorized to talk to the media. Banks generally outsource the creation and maintenance of ATM networks. Customer demand has led to the widening of the ATM network, said K.R. Kamath, chairman and managing director of PNB. Most state-run banks want to reduce their dependence on high-cost branch models and increase their reach.
“Many public sector banks such as Bank of Baroda are working on improving their channel banking part as this provides speedier transactions and reach at lower cost,” said Abhishek Kothari, analyst with Mumbai-based brokerage, Way2Wealth Brokers Pvt. Ltd. “Going ahead, this channel is going to be critical for banks as more and more customers even from the rural areas are increasingly finding it convenient to access basic banking services.”
Graphics by Yogesh Kumar/Mint