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Indian banks increasingly are outsourcing deployment and management of ATMs in the wake of rule changes from that country's financial authorities designed to increase consumer access to cash, according to ATM&Debit News sister publication CardLine Global.

This week, for example, the State Bank of India, which says it deploys at least 12,000 ATMs, awarded an outsourcing deal to Mumbai-based financial-technology vendor AGS Infotech. The approximately $10.5 million deal covers deployment and management of 1,000 ATMs, according to AGS.

The deal follows similar outsourcing agreements the bank signed earlier this year with HCL Infosystems Ltd., Tata Communications Ltd. and C-Edge Technologies, all based in India.

Additionally, India's Yes Bank Ltd. in July announced an ATM network-expansion deal with First Data Corp., a Greenwood Village, Colo.-based processor. Under that deal, First Data will help the bank identify new ATM sites and provide installation and monitoring services, according to a statement.

Yes bank hopes to expand its network of approximately 90 ATMs to 3,000 machines by 2015, with a specific focus on sites located in such places as shopping malls and restaurants.

The expansion and outsourcing efforts appear unlikely to slow. "We believe that ATM outsourcing could definitely be a cheaper and efficient way to set up and operate an ATM network that can ... help increase footfalls at associated branches," says a spokesperson for the state-run Central Bank of India.

The main spark behind the efforts appears to be ATM rule changes announced earlier this year by the Reserve Bank of India, the country's central bank. The financial institution has given the country's commercial banks permission to deploy offsite ATMs without approval from regulators.

This came after the Reserve Bank told financial institutions to offer free ATM cash withdrawals to their own debit cardholders. Banks still can surcharge noncustomers who use their ATMs, providing an incentive for ATM-network expansion.

"This ... has generated a new revenue stream for the banks who have installed a large number of ATMs across the country," says Prathima Rajan, an-India-based analyst with Boston-based research firm Celent.

The ATM rule changes come amid other efforts to expand cash access to consumers, especially those in rural parts of India. Banks, with government backing, continue to announce plans to deploy biometric ATMs where customers can authenticate themselves with mathematical representations of fingerprints, an effort to attract poor, illiterate consumers to financial services.

The Reserve Bank in July also said it would allow consumers making debit card purchases to receive up to 1,000 rupees back at the point of sale. Bankers, however, worry about how the scheme would work, including splitting fees with merchants and the outcome of consumer complaints.

Though withdrawals at the point of sale will enable more consumers to quickly access cash, an official from the Bank of Baroda says "it remains to be seen how banks will work with the merchants on this and what kind of redressal mechanism is put in place." The official, who requested anonymity, worries that in a dispute, customers might blame the banks, not the merchants.

India has nearly 45,000 ATMs and 4.7 million payment terminals, according to the Reserve Bank. ATM


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