ATM Banking in India: Problems and Prospects Dr.

Ravindra Kumar Saini1 Ashish Saini2 Abstract Sound banking network is an essential prerequisite of prosperity of any economy. All the financial activities of an economy function through banking network. Before first phase of banking reform (1992-93) efficiency, productivity, profitability, rate of return and volume of the banking business were very low in India. Keeping in view low growth of baking and economic prosperity slowly- slowly computerization of banking system has been implemented in Indian banking at that time bank employees were not familiar with new technology they opposed of computerization of Indian banking; contemporary new private sector banks started baking practices with new technology and equipments. A part of technology in banking Auto Teller Machine (ATM) was introduced in Indian banking in last decade. In the current scenario of banking Auto teller machine (ATM) become back bone of retail banking. This machine brought a revolution in banking all over the world. The fundamental concept of ATM 24 7365 Banking has made banking more useful and reliable. But in the developing countries many ATM related problems have been encountered this paper examines these problems along with growth and prospects. Paper divides all problems in to two categories one is problems faced by customers and second is problems faced by bankers. Paper also highlights factors responsible for world wide rapid growth of ATM banking practices. Key Words: Indian Banking, ATM, Technology, Introduction: During the last decade Indian has witnessed drastic change in the information and technology sector and cemented the way for its wider applications in various sectors. The use of information and technology in resolving various issues and opening new avenues for providing a better quality of life was well conceived. Implementation of IT in Indian banking brought momentous changes for banker as well customers. A part of it
1

ATM (Automated Teller

Assistant Professor , Department of Management Studies, College of Engineering Roorkee, Roorkee Haridwar E-mail: sainirk25@gmail.com, MB: 09634845848 2 Lecturer, Department of Computer Science, RIMS, Roorkee, Haridwar

Machine) is a computerized machine plays a vital role in facilitating the banking services for banks as well customers such as withdrawal cash, money transfer from one account to another, deposit money through cheque, to balance enquiry and other facility related to bank. History of ATM: The idea of this machine developed simultaneous in Japan, Sweden, United Kingdom and the United States. But the first cash dispenser machine developed machine by the Luther George Simjian after great efforts. His first machine granted on 26 February 1963, which is known as Bankograph. This machine was able to accept coins, cash and cheques but deprived from cash dispense feature. The first cash dispense machine was developed and used in Tokyo in 1966. In the same time with the effort of Sweden and Britain develop their own machine in 1960s. But the Barclays Bank in Enfield Town in North London, UK firstly put on 27 June 1967. The credit of this invention goes to John Shepherd-Barron. His design used special cheques matched with PIN (Personal Identification Number) this machine was also known as DACS. The third developed machine marketed after 1969 in Europe and USA by Burroughs Corporation, which is known as Speytec. This machine worked with a card with a magnetic strip at the back. They used principles including Carbon-14 and low coactivity magnetism in order to make fraud more difficult. The idea of PIN stored on the card was developed by British engineer working on MD2 named James Good fellow in 1965. This machine fully patented in 1970. It influenced the industry as whole as complete Currency dispenser system. The first modern ATM came into use in 1972 in UK, and IBM 2984 designed on the request of Lloyds Bank, which was similar in function of todays machines. The HSBC the Hongkong and Shanghai Banking Corporation was the first bank to introduce the ATM concept in India in the year 1987. But at that time people were not so familiar and did not prefer this machine. But as the computerization and awareness grown up, then people started to prefer this machine slowly-slowly. After oberserving the utility of ATM most of banks opened their own ATMs at various locations and till the year 1997 more than 350 ATMs were open in India, and this figure became more than double in next two year. At present time the number of banks in India are more than 72 including all associated banks of State Bank of India, Nationalized banks, Private Banks, Foreign Banks, And the number of ATMs in India are

more than 77,000 Whereas in the year 2007 this figure was 32,342 only. In India 40 ATMs per million people which is very low as compare to other developed countries. From first day of April 2009, entire ATM network is now available to customers from any bank for transactions for no fee at all, irrespective of the banks in which they have their accounts, Now Customers will not be levied any fee on cash withdrawals using ATM and debit cards issued by other banks. This will in turn increase usage of ATMs in India. More people are now moving towards using the automated teller machines (ATM) for their banking needs. According to a survey by Banknet India, 95% people now prefer this modern channel to traditional mode of banking. Almost 60% people use an ATM at least once a week. Basic Facilities of ATM: ATM provides the facility of banks customers to access their accounts without the need of actually visiting a bank branch. Some facility which provided by the ATM are free of cost: Flexibility of using ATM of other banks i.e. we can make transaction from any ATM while our account not in same bank. Can recharge their mobile phone prepaid connection. Pay the bills. Money transfer from one account to another one. Check the balance of account at any time. Can register their mobile number for account details. Deposit the cheque in account. Table:1 Growth of ATMs in India
Year 2005-06 2006-07 2007-08 2008-09 Number of ATM 21,110 25,247 34,547 43,651

2009-10 2010-11 Source: Cyber Media DQ Estimates Research Graph:1

57,765 76,871

Growth of ATM in INDIA

80,000.00 70,000.00 60,000.00 50,000.00 40,000.00 30,000.00 20,000.00 10,000.00 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Number of ATM

Table: 2 Cost of Transaction with various mode of Banking Mode Teller System ATM Phone Debit Card Internet Source: IBA Bulletin special issue 2005 As clearly depicted by the Table 2 that maximum share of banking transactions shifting from branch banking to ATMs and internet banking, at the end of March 2000 approximately 94% transaction were based upon branch banking whereas, at the end of March 2004 only 25% transactions have been recorded by the branch banking. Innovation based (internet, ATMs and mobile) transactions reduce cost per transaction and save time for banker as well customer. Table 2 shows the impact of various modes of transactions on the transaction cost from teller banking Cost Per Transaction (in Rs.) 1 0.45 0.45 0.2 0.1

to internet banking. By the teller system per transaction cost is Rs. 1 whereas by the internet cost per transaction is Rs. .10. ATM expenses per transaction are Rs. .45. To eliminate the teller banking system from Indian banking Reserve Bank of India has introduced an electronic funds transfer system called The Reserve Bank of India National Electronic Funds Transfer System (herein after may be referred to as NEFT System or System). The NEFT system was introduced in November 2005. The settlement timings for NEFT transactions have been enhanced by one and a half hour with effect from July 7, 2008. The NEFT is now available from 0900 hrs to 1700 hours on week days with settlement at 0900, 1100, 1200, 1300, 1500 and 1700 hours and the 3 settlements on Saturdays at 0900, 1100 and 1200 hours. 91 banks with over 61,000 branches are participating in NEFT as at end of September 2009. To encourage the transactions in ECS/NECS/NEFT the processing charges for electronic payment products have been further waived up to March 31, 2010. The charges levied by banks to the customers have also been rationalized and for NEFT the maximum charges are Rs.5 and Rs.25 for transaction value up to Rs.1.00 lakh and above Rs.1.00 lakh, respectively. Payment System Indicators EFT/NEFT

Volume (000s) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2,549 3,067 4,776 13,315 32,161 66,357

Value (Rupees Crore) 54,601 61,288 77,446 1,40,326 2,51,956 4,11,088

Source: Annual Report 2009-10 RBI Govt. of India

Graph:
E Payment Indicator EFT/NEFT
70000 60000 50000 Volume ('000') 40000 30000 20000 10000 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Year Volume (000s) Value (Rupees crore) 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 Value (Crores)

Above graph shows the increase trend of Payment System Indicators EFT/NEFT. Six years data has been analyzed to find the trend of EFT above graph is increasing exponentially it indicates the high level of growth of transitions. In 2004-05 the volume of EFT/NEFT was 2, 54,900 with amount of Rs. 54601 crores increased by 2503.26% reached at 66, 35,700 with amount of Rs. 4, 11,088 crores in 2009-10. Growth of ATMs World Wide The launch of ATMs was milestone in the banking system, and today we cannot imagine our lives without this piece of technology. Not only in India but also in other country

More people are now moving towards using the ATMs for their banking needs and also for domestic as paying bills, recharge phone, transfer money etc. .
Growth of ATMs in the world Year 2007 2008 2009 2010 2011 2012 2013 2014 Source Global Market and Forecast 2014(Retail Banking Research) Number of ATM 1,780,189 1,912,178 2,029,224 2,154,970 2,235,835 2,407,775 2,609,160 2,848,190

Source Global Market and Forecast 2014(Retail Banking Research)

Problem with ATM: The ATM market in India is not yet saturated. Though the concentration of ATMs is greater in metropolitan cities, the demand is increasing for other cities. According to study, 95% people now prefer this modern channel to traditional mode of banking. Almost 60% people use an ATM at least once a week.

Mostly people use ATM but due to the lack of awareness many of persons face the problem to using this machine. The problem relate with the ATM machine is to be analyze on the basis of personal interview of customer and banks and divide into two category.
1) Problems face by the Customers :

They didnt receive cash while the account debited. Wrong insert the ATM card. This problem is more common with new ATM users who are not familiar with ATM machine.

They didnt receive slip of account balance. Money transfer problem. Some time money stuck in machine at the time of transaction. Some time machine didnt accept ATM cards. Time out problem when the customer late for any step of processing.

2)

Problem face by the Banks :

Theft money from ATMs Burglary of ATMs (including theft of entire ATMs) System problem (including server down) System failure (system crash or the software not work properly).

Some factor which affect the growth of ATMs as follows:

Make transaction any time and more than one time in a day.

Take less time to make a transaction than a teller in banks. Easy to use for people. Much reliable i.e. no body can access your account without your permission. It reduce the banks work load. Accurate transaction. Can make payment for purchase anything.

World wide the ATMs are growing rapidly with very fast rate at present the ATM number is 2.2 (approx) million where this figure was only 1.5 million in the year of 2005, and 1.7 in the year 2007. If the growth of ATMs increase in same manner, than this figure will be reach 2.8 million till the year of 2014. Conclusion As the banking sector computerize day to day, and ATM have became a part of modern banking system. The banks in developing country adopt this to improve their own internal process and also for increase facilities and services of their customers. Customers faced some problem to use this due to the lack of awareness but as the awareness increase and people became familiar with this, the growth of ATM rapidly high at the world wide level. Now this technology is simple, safe and secure and people feel satisfaction to use this. References Ahmad Zakaria Siam Role of the Electronic Banking Services on the Profits of Jordanian Banks American Journal of Applied Sciences 3 (9): 1999-2004, 2006 Bisht, N.S., Mishra, R.C. and Belwal, Rakesh Liberalization and its Effect on Indian Banking Journal Finance India, Vol-xvi No.1 pp147-152 March2002.

Joshi, Vasant, C., and Joshi, Vinay, V., Managing Indian Banks: The Challenge Ahead, Response Book, A Division of Publication Pvt. Ltd., New Delhi. Shroff, Temurasp, Firdos Modren Banking Technology Northern Book Center New Delhi Singh, Sultan Komal, Impact of ATM on customer satisfaction (2009) Intelligence Journal, Vol-2, No-2. Tanaji, Satish, Streams Bhosale, Technological Developments in Indian Banking Sector, Indian Business

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