Private sector lender, Axis Bank has signed an agreement with two third party service providers in what is referred to as the largest ATM outsourcing deal. The bank plans to increase the number of ATMs in its kitty to more than 9000 in the upcoming 18 months.

The contracts have been signed with Prizm Payment Services and AGS Infotech. The companies would be responsible for setting up and managing 5000 ATMs on a purely variable model, a person knowing the ongoings of the deal said.

As on March 31, 2010 the ATM count of Axis Bank has been 4,293. As per the contract, Prizm will set up 3,500 ATMs while AGS Infotech will set up 1,500 ATMs.

There will not be any capital expenditure on the part of the bank owing to the outsourced nature of the deal. The bank would have responsbility only to the extent of cash settlement and would pay the service providers fees on a per transaction basis.

The fee amount has been decided to be Rs 13-15 for every cash withdrawal and Rs. 3-5 for every balance enquairy. For transactions done using ATMs not belonging to Axis Bank, the charges would be over and above the fixed fee and would be borne in parts by the service providers and the bank.

According to the person mentioned earlier, this deal could amke the ATM network of Axis Bank stand as the second largest in the country following the largest lender of the country, State Bank of India.

With the RBI relieving the customer from paying a fee for cash withdrawals, set up and management of ATMs has become quite expensive for banks. Most banks thus try to avoid this expense by going in for outsourcing deals. Yes Bank also plans to roll out outsourced ATMs.

"While RBI has given banks some respite from the free-ATM rule, we think it's just a matter of time before ATMs become free again. This will increase ATM expenses for banks," said a senior executive of a private sector bank.