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Banks seek to limit free ATM transactions to 5 per month

Tuesday, 7 January 2014 - 12:00pm IST | Place: Mumbai | Agency: DNA

Banks have requested the Reserve Bank of India (RBI) to allow them to charge customers for transactions from every sixth visit at Automated Teller Machines (ATMs). These would include cash as well as non-cash transactions like balance inquiry.

At present, you can access your bank’s ATM (the bank in which you hold an account) any number of times free of charge. However, customers of other banks can be charged up to Rs20 for every transaction if it exceeds five visits. Banks now want the regulator to limit the total number of free transactions (at your bank plus other banks’ ATM) to five per month.

For every transaction that you make at another bank’s ATM, your bank has to pay an “interchange fee” to that bank for letting you use its services. The fee is Rs15 per transaction presently. Banks have requested RBI to increase the fee from Rs15 to Rs18. If approved, this would mean a higher fee from the sixth transaction in a month. The fee on non-cash transactions is Rs5, which will remain the same.

M V Tanksale, chief executive of the Indian Banks’ Association (IBA) said that increased concentration of ATMs in one area has killed their profitability. This is peculiar of urban areas while in rural areas less number of footfalls is an issue. It takes at least 150-200 hits per day for an ATM to become viable for a bank.

For instance, while the number of hits in overall ATMs have soared in recent times, the number of hits per ATM has decreased. The result is that a bank like the State Bank of India and its associate banks, that have the largest customer base in India end up paying a hefty amount to other banks despite having the largest number of ATMs as well. On the other hand, banks that have smaller customer base but a relatively good number of ATMs are benefiting from the service.

Moreover, securing every ATM with an armed guard and installing CCTV camera will increase the cost roughly by Rs40,000 per ATM, said Tanksale. At present, there are about 140,000 ATMs in the country. Also, banks have been asked to install Aadhar-enabled ATMs, which would again prove costly.


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