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Using ATMs outside the home branch network may cost you

Satyanarayan Iyer
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IBA suggests to RBI that customers should be charged

The Reserve Bank of India is in the process of deciding if banks can charge a fee for using automated teller machines (ATMs) to withdraw money outside the home bank ATM network.

Home bank network means ATMs of the bank in which you have an account.

The Indian Banks’ Association (IBA) has suggested to the RBI that customers who withdraw money from other banks ATMs should be charged.

A Krishnakumar, Managing Director, State Bank of India, said, “The IBA has made a request to the RBI to rationalise ATM charges in urban and metro areas.”

If accepted, this would mean that customers will have to pay a fee for using ATMs other than the home branch ATM for withdrawing money from the very first transaction (against five free transactions allowed in a month now at other bank ATMs). According to estimates, this charge could be as high as ₹20 per transaction.

This issue took centre-stage late last year after the law enforcement authorities directed banks to provide security at their ATMs, after a woman was attacked in Bangalore.

When the noise for providing security got shriller, banks came together and proposed to increase the charges on ATM transactions to meet their “expenses.”

After a hue and cry, it was decided that the IBA will further study the issue and make appropriate recommendations to the RBI for approval.

India’s largest lender, the State Bank of India, has over 42,000 ATMs in its network. According to Krishnakumar, the bank’s ratio of ATMs to debit cards is 1:2,500. The corresponding average for other banks is 1:1,700.

Shortage of ATMs

This shows that there is a marked shortage in the number of ATMs in the country, where only 40 per cent of the population has access to formal banking services.

Even if banks intend to scale up their ATM networks, it appears that there are not too many ATM makers.

“There are a limited number of ATMs made in the country. We may have aspirations but what can we do if there is not enough supply,” Krishnakumar said.

People often go to ATMs of other banks for reasons of proximity, ease of operation and operability. It is in this backdrop that the proposal to hike charges for ATM transactions should be viewed.

(This article was published on July 1, 2014)
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