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Thiruvanathapuram , Sept. 5

FEDERAL Bank expects its successful business model of fanning out into rural Kerala heartland with ATMs will find ready takers among peer banks.

Speaking to Business Line, Mr K.P. Padmakumar, Chairman, said the rural-urban divide in the State existed only in perception. The additional `low-cost' savings deposit accounts generated have ensured that all 150-odd ATMs except two have been able to `break even' and justify the investments.

So much so, the bank has not yet felt the need to share its ATMs, a trend which is fast catching up in the banking industry. "We would like to further consolidate our network and also wait for the banking habits to percolate to a still wider base before thinking of sharing the network," Mr Padmakumar said.

The bank intends to raise the number of ATMs to 300 by the year-end. There were still areas in the State where an ATM could prove a viable proposition, he said.

The bank's decision not to dive headlong into ATM sharing flows out of other soundly argued concerns as well. For instance, it would rather like the recently introduced Visa debit card to stabilise first as also to track the pattern of withdrawals from various centres.

It wants to ensure a dependable infrastructure for itself in order to avoid a situation where customers suddenly find that a particular ATM has not stocked enough cash. More so with those dispensing salaries.

"So we're looking at the stabilisation of the network. There are no two opinions about sharing ATMs being a mutually rewarding experience for both partners. Our bank also draws comfort on the fact that tourists will find the shared ATM network very useful in Kerala, which is a well-known destination in travel circuits".

As already mentioned, the success of the bank's business model is determined by the probability of an ATM raising enough low cost deposits to defray the expenses of installation.

The break-even figure is Rs 158 lakh in terms of average savings account balance generated during the first year after installation. All except two of the 150-odd ATMs in Kerala have managed to raise the benchmark figure for savings.

Replying to a question, he said the "footfalls model" could not be used as a yardstick till such time banking habits have not percolated to the "desired" extent.

For instance, bankers have been heard surmising that an ATM should register around 300 transactions on a daily basis for being considered a viable proposition. This does not work in Kerala, where banking habits are not entrenched as in the metros. Federal Bank ATMs register around 100-120 transactions on a daily basis.

Explaining the unique banking culture in the State, he said ATMs made a lot of sense for kin of lakhs of NRIs residing in the countryside. This has ensured that Generation Next also grew up in sync with emerging trends in technology. This is an inducement for elders to already effect switch to electronic banking means.

"Our strategy is to increase our spread, which is more or less akin to opening a new branch, and capture more business as a first mover, because the battle will be won by that bank which posts the lowest cost of deposit. The size of the cake remains the same, it's only about eating into the shares of others. We also try to get a customer of a rival bank to open a second account with us," he said.

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