The Hindu Business Line : Use ATM of any bank and pay less

Mumbai, Dec.24 It may soon cost you less to withdraw from the ATM of another bank (a bank you don’t “bank” with). A draft paper issued for discussion today by the Reserve Bank of India has proposed this.

The RBI’s draft paper has suggested that banks currently charging more than Rs 20 per cash withdrawal should reduce it to Rs 20, effective March 31, 2008. It also recommends that the transactions be made free, effective April 1, 2009. Banks will also not be allowed to increase the transaction charges beyond those prevailing as on December 23, 2007.

Based on information collected from all public sector banks and a cross-section of other banks, the RBI says that banks charged anything between zero and Rs 57 per transaction for cash withdrawals and ‘balance’ enquiry. “The charges depend on the network relationship between the bank owning the ATM and the customer’s own bank,” said the draft paper.

Banks having bilateral arrangements charged lower fees for transactions involving the two but higher for those outside it.

The charges vary from bank to bank and network to network making it difficult for a customer to be informed about the charges and thereby making them wary of using other banks’ ATMs. The paper says that there was a lack of transparency in the fee structure.

Mr Aspy Engineer, Vice-President-Alternate Channels, Retail Banking Department, Axis Bank, said, “The draft paper suggests that banks should only charge their customers the interchange fee that the bank is liable to pay to the other bank. The additional amount that the banks were charging in order to make profit has to be waived off.” Axis Bank offers free transactions to its ‘priority banking’ customers.

A senior bank official from a private bank said that RBI’s move would discourage banks to expand their ATM networks and it would be a disadvantage for banks which had a huge network of ATMs as it would be a loss of revenue.

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