Coming soon: Co-branded ATMs

ATM deployment is set to gain scale with the Anil Ambani group's Reliance Capital and a few technology firms joining hands with partner banks to launch co-branded (known as partial white-label) ATMs.

A white-label ATM is a US term that refers to ATMs run by non-banking entities. Partial white-label ATMs refer to those that are run jointly by banks and non-financial entities.

The first of such ATMs is expected in three or four months, with the Reserve Bank of India (RBI) giving preliminary clearances to UTI Bank and Yes Bank.

UTI Bank is working out the details with Chennai-based Financial Software and Systems (FSS) and US-based E-Funds, while Yes Bank has an arrangement with Reliance Capital.

FSS initially plans to install 1,000-1,500 co-branded ATMs. FSS officials said the ATMs and ATM infrastructure would be under the FSSNeT brand, though discussions with UTI Bank are still to take final shape.

A senior UTI Bank official said the bank would be the sponsor bank as the licence would be issued to it. It would also be the cash-supplying and cash settlement bank. UTI Bank plans to partner three to four companies.

A Yes Bank spokesperson said, "We are at a preliminary stage. We are exploring opportunities and talking to a lot of people including Reliance Capital."

The RBI has chosen to allow partial white-label ATM licences as it is reluctant to issue ATM licences to non-banking entities. In this case, the licences will be issued to banks, but the ATMs will be owned and operated by non-banks and the ATM sites will be jointly branded.

Final details of the partial white-label ATM policy, such as the extent of branding allowed to and space to be occupied by the non-bank brand, are expected shortly.

The central bank's intention behind allowing part-white label ATMs is to ensure that this alternative banking channel spreads fast in smaller cities.

The current installed base of ATMs is 21,142 (at the end of March 2006). Commercial banks had 54,791 branches on March 31, 2006, putting the ATM-to-branch ratio at 38 per cent. But bankers say the number should be two to three times the number of branches.

Bankers expect a 20-40 per cent cost saving as the capital expenditure and recurring expenditure would be borne by the companies setting up ATMs and banks would have to pay only variable cost per transaction.