Saturday, 24 September 2016

What are Automated Teller Machines (ATMs)?



Automated Teller Machines (ATMs) are primarily used for performing some of the banking functions such as withdrawal of cash or deposit of cash/cheque etc., by using an ATM card. Each customer is provided with an ATM card with a unique Personal Identification Number (PIN). Whenever a customer performs a transaction,the person has to key in the PIN which is validated by the ATM, before the machine permits any transaction. The PIN has to be kept secret by the customer, to prevent any misuse or fraudulent transactions in the event of loss of the card.
Stand-alone ATMs made their appearance in India, in the early 1990s. These were mostly installed by foreign banks in their branch premises, as per the then existing policy. Easing of restrictions on the location of ATMs has led to their being installed at convenient places such as airports, central business districts, hospitals etc.

 Indian Bank's Association (IBA) has set up a Shared Payment Network System (SPNS) or SWADHAN network of ATMs of its member banks in Mumbai. The network went live on February 1, 1997. The objective behind the SWADHAN network is to provide 24 hours, 7 days in a week and 365 days in a year, electronic banking service to the customer of a member bank any where in the city of Mumbai.
 The member banks which participate in the network issue cards to their customers for transacting on SWADHAN network. The customer is free to conduct  transactions at the ATMs of any of the member banks located in the neighbourhood. The services offered under SPNS are cash withdrawal, balance enquiry, cash/cheque deposit, transfer of funds, request for cheque book, standing instructions and statement of account, and change of PIN.

The ATMs of member banks are connected to a Central Switch through MTNL leased lines. The Central Switch which is the heart of the SWADHAN network is located in Dadar and is connected to three zonal hubs. These hubs are located in Chembur, Fort and Andheri. The ATM in a particular area is connected to the nearest zonal hub.

The cardholders' database is kept at the Central Switch. Banks update the balances at the Switch at pre-determined frequencies. On a daily basis the Switch provides settlement reports necessary for arriving at inter-bank settlement.

Bank of India, a public sector commercial bank, acts as the settlement bank for all inter-bank transactions in SWADHAN. Every member bank has to maintain a deposit of Rs.25,000/- with the settlement bank.

As on January 15, 1998, 69 ATMs of 19 member banks are live on the network. The number of transactions is slowly picking up on the network. Initial teething troubles of high intra-city leased line failure are being sought to be minimised with better interaction and follow up with MTNL officials. IBA is also pursuing with DOT to permit PSTN connectivity as a back-up in the event of leased line failure. 

The future plans include expanding the network by connecting more than 500 ATMs over the next 5 years, increase the number of transactions per day per ATM, to establish connectivity with Point of Sale terminals at merchant establishments as well as international payment networks such as VISA, and MasterCard.

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