The South Central Railway (SCR) has decided to outsource the work of collecting cash from as many as 364 of its stations across four States, and depositing them in banks.
It is a five-year contract and spells big business for the bank that bags the contract and the agencies empanelled with it.
For the SCR, it would mean shifting tracks to a professionally managed service, for which the RBI has prescribed norms, and comes with an insurance cover, at a cost. At present, either the supervisor concerned deposits the cash in a nearest bank branch or there is a pick-up arrangement provided by the latter from the station.
And then there are several stations that generate meagre amounts from passenger ticket sales to which cash chest is sent by a train at specific intervals to collect the cash.
“It will be a big business for the agencies,” says J. Swaminathan, chief general manager of State Bank of India’s Hyderabad Circle. So what’s in it for the banks in the tender that the SCR floated last month since they themselves have entrusted door-step cash collection and deposit service?
“We will not make money except the cash-handling charge. It is negotiable. Sometimes we may waive or reduce it,” he says.
Depositing cash
Sources in the SCR say the tender for the contract, which is being processed, would be awarded to a bank. Other railway zones too are considering outsourcing the work as the move would end the daily hassles associated with depositing the cash. Once deposited in the bank by the agency, the same could be confirmed by checking the account online.
Typically, the cash collection agreements are for three years, while the SCR is offering the same for a longer period. These arrangements work on a cost recovery basis. “The agencies’ fee will have to be borne by the customer. We provide door-step banking, at a cost as quoted by the agency. It’s a matter of convenience for both,” says Mr. Swaminathan.
Bank guarantee
The Railway contract would be decided based on a lowest quote. Some public sector entities insist on bank guarantee too in addition to the insurance that covers cash during transit. In the case of most private firms that approach the banks to engage agencies for cash collection and deposits, the contract is awarded based on negotiations.
Jewellery showrooms, petrol bunks, liquor merchants and those in businesses where a large amount of cash is generated daily prefer to use such outsourced services.
