Banking with the State Bank India will no longer be a brick-and-mortar affair with India's largest bank lining up an information technology spend of Rs 3,000 crore (Rs 30 billion) over the next two years to ensure robust net banking, mobile banking and ATM systems to help shift 50 per cent transactions from branches to alternative channels.

The move will not only help ease pressure at the over 10,000 SBI [Get Quote] branches but also lower costs for the bank. While a transaction at a branch costs around Rs 50, one at an ATM works out to Rs 18, a senior SBI executive said. Transactions through the Internet are even cheaper at Rs 10 each.

For private banks, which have a smaller workforce, the transaction cost at a branch hovers between Rs 40 and Rs 45, while the same at an ATM works out to Rs 8-14 depending on the location.

At present, the average daily transaction under the core banking channel is estimated at over 20 million, or over six billion annually, whereas that of alternative channels like ATMs is estimated at 25 per cent, or 1.5 billion. In two years, SBI expects the number of transactions to reach 10 billion, and the target is to encourage customers to use the alternative channels for 50 per cent, or five billion, of transactions.

Since the bank will not cut down its workforce or shut branches, the savings may be notional. However, the move is expected to not just improve efficiency levels but also help customers access the services without visiting a branch.

"With increased pressure on profit margins, enhancement of IT-enabled banking will play a major role in reducing the operational cost of the public sector banks," said R P Sinha, SBI deputy managing director in-charge of IT.

SBI, which embarked on a mass ATM roll-out a few years ago, has decided to raise its IT spending to around Rs 1,000 crore (Rs 10 billion) this year, compared with Rs 600 crore (Rs 6 billion) in 2007-08. In 2009, this expenditure is expected to be in the range of Rs 1,600-2,000 crore (Rs 16-20 billion). In addition, there will be a cost of adding ATMs, a large part of which has been outsourced. In two years, SBI expects to have 20,000 ATMs, compared with 9,000 at present.

"We will introduce new two-faced ATMs, which will increase the daily hits per machine to 700 from 330 at present and reduce the transaction cost to Rs 10 (per transaction)," Sinha said. In addition, it is rolling out initiatives such as e-trade and e-freight, for which it has tied up with Indian Railways. Through e-freight and e-trade, SBI and its partners can use digitised documents and transact online.

At the retail level, you can expect more cash-back kind of offers on your debit or credit cards as the bank tries to encourage people to shift to other modes of payment. SBI is also pushing for presence at more merchant establishments.