News

Indian Finance Ministry asks banks to joint source ATMs to decrease costs, reach unbanked

September 11, 2011

According to the Hindu Business Line, the Indian Finance Ministry has asked public sector banks to figure out the logistics of joint sourcing ATMs between state and district.

The motivation behind the joint sourcing of ATMs is to decrease the cost of procurement through economies of scale, as well as encourage banks to deploy ATMs in unbanked rural areas. The move is also expected to lower the cost of transactions.

“It is likely that according to the joint sourcing procedure being worked out by the Indian Banks' Association, procurement of ATMs would be done either at the state or district level. This will reduce the cost of procurement for banks as volumes will be higher,” said a senior public sector bank official.

Currently, the procurement price of ATMs, depending on the size of order, varies between Rs 4-5 lakh and Rs 6-7 lakh per ATM. The government wants public sector banks to drive a collective bargain with ATM vendors so these costs decrease drastically.

According to the article, bankers fear that the government will issue a stipulation that only allows expansion of ATM networks in metro and urban areas if the banks also open a percentage of new ATMs in rural areas.

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