Axis Bank Negotiates Acquisition Of AGS Transact ATMs Due To Service Quality Issues

Axis Bank is actively negotiating the acquisition of between 3,500 to 4,000 ATMs, currently under the management of AGS Transact Technologies, with plans to transition these machines to a new service provider. This move comes as a response to the declining quality of service offered by AGS Transact, according to individuals close to the situation with ET. Before finalizing the deal, Axis Bank intends to carry out a thorough audit to assess the value of these ATMs, considering factors such as depreciation, maintenance, and upgrade expenses. The bank, recognized as India's third-largest private sector lender, has confirmed its ongoing discussions and evaluation process concerning the takeover of these machines.

Despite efforts to reach AGS Transact for comments, no response was available at the time of inquiry. The relationship between Axis Bank and AGS Transact operates under a 'Brown Label ATM' arrangement, wherein AGS Transact is responsible for the full lifecycle management of the ATMs, including aspects like hardware, leasing, and maintenance, while the machines carry Axis Bank's branding. This model has traditionally enabled banks to broaden their ATM networks without direct investments in infrastructure. However, given the current circumstances, Axis Bank is considering other service providers to assume control of the ATMs, pending completion of the buyout process.

Axis Bank's ATM network spans over 15,000 units across the nation, including cash recyclers. Despite the issues with AGS Transact, a significant portion of the bank's ATMs, about 80-85%, remains operational without interruption. On March 10, a report brought to light the financial struggles of AGS Transact, which have adversely affected the functioning of over 38,000 ATMs across various banks, such as the State Bank of India, ICICI Bank, and HDFC Bank, among others.

The financial instability of AGS Transact has led to a substantial reduction of its network, from managing 75,361 ATMs and cash recyclers to relinquishing control of over half to other network providers. The company's difficulties are compounded by outstanding dues of ₹726 crore, raising alarms over its potential insolvency. Credit rating firms, including Crisil and India Ratings, have downgraded AGS Transact's ratings due to the heightened risk of debt default. These developments have underscored the need for Axis Bank to seek alternative service providers for its ATM operations.