The country's largest bank, State Bank of India (SBI) is planning to outsource its ATMs. The bank has decided to collaborate with the external agencies to set up automated teller machines (ATMs) in various locations. With this move, SBI intends to leverage ATM network to tap opportunities that are expected to arise in the banking space.

The bank targets to increase the number of ATMs from a current figure of over 8600 to almost three times by March 2010. A senior officer of the bank reported that this would require huge capital expenditure along with administration time. He added, "If the bank can provide better customer services (ATM facilities) without buying machines, why not? It is possible to save on capital expenditure."

Mr. A.K. Purwar, Chairman of SBI remarked, "The plan is in sync with the belief that customers will use ATMs extensively in the days to come. As records stand, ATMs now account for roughly 2 per cent of bill payment transactions, 37 per cent of cheque deposits and 75 per cent of cash transactions." It is felt, these numbers are likely to be revised soon, he added.

Although SBI is outsourcing its ATMs, it will also continue on its own task of setting up ATMs.

The percentage of public sector banks outsourcing the establishment and management of ATMs has always been lower as compared to the private sector banks. Recently, the employee union of public sector had also opposed this outsourcing decision of the bank.

SBI had initially outsourced the back-office work in foreign offices and now plans to set up 500 ATMs through the outsource route, including original equipment manufacturers. Of these 200 will be set up in the metros, 150 in urban locations, 100 in semi-urban areas and the remaining 50 in the hinterland. SBI did not state if these ATMs would be located offsite or at the branches.

The Bank is looking at the outsourcing proposal on a trial basis. The bidders should not have a negative track record with any public sector bank for inefficient services or bad conduct in the last three years of its working. The dealer will have to ensure network connectivity with the bank's switch at New Mumbai along with installing and maintaining the ATMs with continuous power supply, backup facilities and security.

The arrangement for license from the Reserve Bank of India, the usage of its own switch and cash will be the handled by the Bank.

For now, the bank has joined the National Financial Switch, managed by the Hyderabad-based Institute for Development and Research in Banking Technology. This will smoothen banking transactions providing wider availability of off-site channels.

"We expect to see an explosion on this front," the SBI chief noted. However the challenge remains in the fact that merely a fragment - 200 million or so - of the billion-strong population actually has bank accounts. Of this, only 30 million people have ATM cards, he added