Mumbai: Aditi Gorule, 26, an accountant, queued up for her turn to withdraw money from a Federal Bank Ltd’s automated teller machine (ATM) at Dadar, central Mumbai, on Tuesday. She knew there was a general strike, but was not aware that it included banking services.
Chetan Gunaji Yadav, 35, a businessman who was waiting for his turn at the same ATM, was aware of the strike. “An ATM can give me up to Rs25,000 of cash. Bank strikes don’t make any difference to most people these days,” he said.
Alternative routes: A man outside an SBI branch in New Delhi during a nationwide strike on Tuesday. With the advent of mobile and Internet banking, customers can make their transactions even on strike days. Photo : AFP
While trade unions were on a day’s strike on Tuesday protesting against what they said were the government’s anti-labour policies and banking sector reforms among others, bank customers couldn’t have cared less, thanks to ATMs and electronic payment modes of transferring funds.
Union leaders admit that technology has changed the game. “These are all new handicaps,” said C.H. Venkatachalam, general secretary of the All -India Bank Employees’ Association. He was, however, quick to add that the unions never intended to inconvenience the general public. “If there was any other way to show my unhappiness to the government, I would have taken those measures,” Venkatachalam said.
The changes that technology has brought have taken the sting out of nationwide strikes, which would have seen the financial industry grinding to a halt because of such action, even as recently as a few years ago.
ATMs vs bank branches
There are some 87,000 ATMs in India and fewer than 75,000 branches; as much as 45% of the cash machines are not placed inside bank branches. Banks are keen on alternative banking channels because they’re cost-effective.
The State Bank of India (SBI) group had 24,651 ATMs against total branches of 17,913 in March, Punjab National Bank had 5,050 ATMs against 4,855 branches and IDBI Bank had 1,370 ATMs and 806 branches. New-generation private sector banks such as ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd have extensive ATM networks.
According to senior bankers, banks typically spend aroundRs15,000 to Rs20,000 per month to maintain an ATM. A normal branch with three officers could cost anywhere between Rs60,000 and Rs1 lakh or even more, depending on the location.
ATMs typically act as money vending machines, but their functionality is expanding rapidly. For instance, Union Bank of India’s 3,000 ATMs allow interbank fund transfers, which otherwise require a customer to visit a branch or access the Internet. Other banks are expected to follow suit.
The mobile phone is also gaining ground as a payment device.
“The availability of options to a customer gives a lot of confidence to go on with the daily business,” said Sanjay Sharma, managing director of IDBI Intech Ltd, an arm of IDBI Bank involved in banking technology development.
With the Reserve Bank of India (RBI) allowing “white-label” ATMs run by third parties, the number of such machines will increase. That makes the branches relevant only for high-value cash withdrawals and paper-based transactions such as cheque clearing, apart from bulk transactions. The banking system clears some 4-4.5 million cheques a day.
“It is a fact that public strikes have lost their destructive nature on banking transactions with the advent of technology,” said a senior banking industry official, who did not want to be named.
According to analyst estimates, 30-40% of daily transactions are conducted electronically.
The latest Reserve Bank of India (RBI) data indicates that electronic payments are on the rise.
Outward transactions through RBI’s national electronic funds transfer (Neft) totalled Rs18,691 crore in January 2009 with around 3.2 million transactions. In January 2012, there were 20.63 million transactions and the value rose to Rs1.71 trillion—an increase of more than 800% in three years.
HDFC Bank tops the list with 3.01 million transactions, totalling Rs23,437.20 crore. SBI comes second with 2.85 million transactions amounting to Rs18,393 crore.
Neft is a nationwide payment system to transfer funds from one bank to another. The remitter does not need to send a cheque or demand draft and the beneficiary does not need to visit a bank branch as there is no paper instrument to deposit.
“Tech-savvy customers are no longer affected by holidays or strikes,” said Hanuman Tripathi, group managing director of InfraSoft Technologies Ltd, software and services provider to banks and financial institutions. “Unless there’s a system breakdown, which typically will go unnoticed unless it’s a major one and coincides with a strike or a bank holiday, electronic fund transfer has come of age.”
There are other advances that have helped the cause of bankers. Online financial services (including net banking, utility bills payment and insurance), was estimated to be a Rs2,680 crore market, a subset of the approximately Rs31,598 crore e-commerce market by end-2010, according to a March 2011 report by the Internet and Mobile Association of India (IAMAI).
Mobile banking is picking up too. IAMAI pegged the number of mobile users who would have accessed the Internet using their mobile phones by September 2011 at 46 million. The latest figures are not available, but with RBI removing the transaction limit of Rs50,000 per customer per day on mobile banking transactions, this is likely to go up manifold.
Banks are free to set their own per-transaction limits, based on their own risk perception with the approval of their boards. The cap of Rs50,000 was fixed by RBI in December 2009. With around 45 million users accessing the Internet from the mobiles, according to IAMAI, this too is being viewed as a growth area.
RBI has asked banks to strengthen their payment infrastructure for safety in ATMs and point-of-sale terminals. It has set a two-year timeline for banks to upgrade systems beginning with implementation of fraud risk management services by 30 September 2012.
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