SBI to outsource running of 40% of onsite ATMs, marking largest such order

Lender to issue proposal in 45 days, had 63,580 such machines in FY24

State Bank of India (SBI) is planning to outsource the maintenance of 10,000 of its on-site automated teller machines (ATMs).

Sources in the ATM vendor and cash logistics industry said the transaction will be the largest of its kind, and the bank is expected to float a request for proposal (RFP) in 45 days.

SBI has around 25,000 on-site ATMs, and the RFP – on execution – will mean 40 per cent of such machines will be maintained by external agencies. The bank's total ATM base – onsite and off-site – stood at 63,580 in FY24.

SBI did not respond to questions Business Standard sent a week ago.

Of the installed base of around 265,000, some 100,000 are banks’ onsite ATMs and the rest are off-site.

Farming out the maintenance of onsite ATMs helps banks cut costs and focus on what is core. The ATM channel has been under pressure for long, given the costs involved in loading cash has gone up even as fresh demands for hiking the interchange after five free transactions at ATMs to Rs 20-23 from the current Rs 17 continue to linger (interchange is what a bank earns when the plastic of another is swiped on its machines). Outsourcing ATMs also helps address issues regarding downtime for which penalties are likely. When outsourced, downtime becomes the responsibility of vendors, and banks can charge it on them when ATMs are out-of-cash.

The ATM market has been stirring of late after being lacklustre post demonetisation in 2016 when the base stood at 225,000.

Between September 2023 and March 2024, RFPs for the ATM channel had topped 44,500 (more than the 40,000 ATMs added post demonetisation). SBI had floated an RFP for the purchase of 16,000 ATMs and cash recyclers (units in which you can withdraw and deposit cash), and outsourcing of 17,500 ATMs. Outsourcing orders were placed by Bank of Baroda (7,500) and Punjab National Bank (3,500).

Deployment of white-label ATMs (WLATM) – set up, owned and managed by companies other than banks – too has increased. The ATM base of India1 Payments and Hitachi Payments has crossed 10,000. This is seen as an achievement despite the fact that Mint Road’s June 2012 WLATM policy did not pan out as expected. Had it gone to plan, 1,000-25,000 ATMs would have been set up by an operator in the very first year of operations (based on the scheme it had opted for).

Cash network
 

- SBI’s RFP for maintenance of onsite ATMs is seen coming through in the next 45 days

- SBI’s FY24 ATM base – onsite and offsite — stood at 63,580 

- Of the installed ATM base of 265,000, around 100,000 are banks’ onsite ATM

- Between Sep 2023 and Mar 2024, RFPs for 44,500 ATMs have been floated