Banks want branch tag off on off-site ATMs

Commercial banks have asked the Reserve Bank of India (RBI) against considering off-site ATMs on par with branches.

RBI had released a draft branch licensing policy in September 2005 suggesting that off-site ATMs would be considered by the regulator as branches and also the central bank's prior approval would be required for setting up and closing ATMs.

Banks at present set up ATMs without RBI's prior approval and inform the local offices of RBI at the time of operationalising them.

The Indian Banks' Association (IBA), in its views submitted to the RBI, has also called for a review of the central bank's stand on off-site ATMs. Banks have said the move to treat off-site ATMs as branches would be a retrograde step in an era of liberalised banking and urged the central bank to re-consider it.

Banks also want RBI to implement its proposal of banks having to submit a three-year plan from 2006-07 onwards and keep branch licences already issued but not yet put to use by banks outside the purview of the proposed policy.

The draft RBI policy had asked banks to furnish details such as specific locations in their medium term corporate strategy.

A senior official with a leading foreign bank said, "It is extremely cumbersome for a bank to draw up a plan covering a three-year period. For example, a particular town may not seem attractive to us today but it is always possible that a couple of years down the line, the same city might gain prominence due to a shopping mall or an upcoming township."

Also, banks have clarified that they will be able to furnish RBI with information only on the number of branches rather than location-specific information over the prescribed three years.

A senior official with a public sector bank said the RBI wants to have discussion on the draft policy with each bank separately to guide the banks on expansion of their footprint across the country and prevent the "crowd effect".

Under the present set-up, most banks focus more on developing centres and are likely to end up ignoring semi-urban and rural areas.

According to a leading service provider, "Maintenance of structures, and access to repairs and networks is the real issue, which also becomes cost-consuming. It would be easier if service providers are given the leeway to set up networks in the hitherto underbanked tier-II and tier-III regions. The networks deployed by service providers could be used by banks in a collective manner."

The RBI's objective behind the draft branch authorisation policy was to ensure that banking service does not remain restricted to selective urban and metro pockets, but also reaches tier-II and tier-III towns.