In a draft approach paper on 'ATMs of Banks: Fair Pricing and Enhanced Access', RBI said the use of ATMs of own banks for any purpose and of other bank ATMs for balance enquiries should be free of cost, with immediate effect.
For withdrawal of cash from ATMs of other banks, RBI wants banks to cap charges at the rates prevailing as on December 23, 2007, to reduce all charges to a maximum of Rs 20 per transaction from up to Rs 55 charged now from March 31, 2008. It has further suggested that cash withdrawals from any bank ATMs should be free from April 2009.
This circular has sent shock waves among banks that have built a strong ATM network such as State Bank of India, ICICI Bank, HDFC Bank and Axis Bank.
"Now there will be no incentive for bank to invest in building an ATM network. We are not here to do social service. There is no point of setting up ATMs and then permitting other banks with a weak network, particularly foreign banks, to use these without any fee,'' said a senior official from a private sector bank.
Currently, customers of one bank using ATMs of other banks for cash withdrawals pay a charge of up to Rs 57 and for balance enquiry up to Rs 20. At the end of October 2007, the number of ATMs deployed in India stood at 31,078. The cost of setting up ATMs ranges from Rs 20 lakh to Rs 30 lakh.
RBI, in its circular, has stated, "It is evident that the charges levied on the customers vary from bank to bank and also vary according to the ATM network that is used for the transaction. Consequently, a customer is not aware, before hand, of the charges that will be levied for a particular ATM transaction, while using an ATM of another bank. This generally discourages the customer from using the ATMs of other banks.''
A senior State Bank of India official said, "The bank has made huge investment to establish a large ATM network (over 8,000 ATMs in group). RBI has been trying to bring all banks, including SBI on the National Financial Switch (NFS) platform. From the commercial point, the bank will like to recoup the investment made in establishing network. If it (cash withdrawals) is made free, other banks will use our network without having to spend money on setting up network, especially in the remote areas, which SBI has done," he added. The SBI group has planned to establish 25,000 more ATMs in the next two-three years.
"Such a directive is good for developed markets, where the penetration levels are high. In India, where we are investing in building a network, this directive comes as a dampener,'' said a banker.
RBI said data collected from various banks indicate that generally the aggregate inter-change fee and ATM switching charges per transaction range from Rs 10 to Rs 20 for cash withdrawal and Rs 5 to Rs 8 for balance enquiry.
The switching fee being levied by switch providers such as National Financial Switch, global payment systems Visa and Mastercard and networks of groups of banks such as Mitr and Cashnet vary from 0 to Rs 3 per transaction.
RBI said the use of technology should, among others, lead to reduction in transaction costs to banks. Over a period, with the increasing adaptation of the people to the use of technology in their daily transactions, it is expected that there will be a further reduction in the transaction costs.
In these circumstances, the regulator, by authorising the establishment of an ATM, has a responsibility to ensure transparency and fair charges for the use of ATMs.
