Premium on ATM use was much wanted by banks

The premium on transactions in one's own bank's ATMs may have irked many customers but the central bank is all for it though banks may take a differing position. ICICI Bank, the country's largest private bank, till date does not charge its customers for transactions from its ATMs.

But the other three big banks - SBI, HDFC Bank and Axis Bank - are charging Rs 5 to Rs 20 per transaction from its customers for using its own ATMs after the first five free transactions in a month. The move is the outcome of the RBI guidelines in August that restricted own-bank ATM use by customers to five free transaction per month. It had also reduced the other-bank ATM use from five free transactions to three in six metros.

While many experts see this move as bizarre, the bankers feel otherwise. A banker on condition of anonymity said, "It costs the bank Rs 15 to Rs 20 on every transaction."

According to Himanshu Pujara, Managing Director of Euronet India that provides electronic payment and transaction processing services, another big issue is the Rs 15 inter-change fee paid by the banks whose ATM cards are used by customers in other- bank ATMs. The big banks with large ATM networks have been opposing attempts to lower the charge while the smaller banks with lesser ATMs have been at the receiving end as they end up paying more.

In April 2009, the RBI for the first time put a cap on the charges levied at Rs 20 per transaction after bankers started charging anything from Rs 5 to Rs 60 per cash withdrawal.

Some bankers say the latest move was precipitated by customers who do not use mobile or Internet banking for cheque book requests or balance enquiry.

"Customers also withdraw cash and pay utility bills. It can be paid easily through net banking," says a banker. Recently we introduced toll-free numbers for balance enquiry, cheque book request, to which customers are gradually migrating," says Nitin Chugh, Head (digital banking) at HDFC Bank. Even today, the debit/ATM card is mostly used to withdraw money though it can be used as a shopper's card. RBI data show debit card use at merchant outlets is less than five per cent in terms of value transacted.

The bankers have the full backing of the RBI Governor Raghuram Rajan on this issue. In a FICCI seminar recently Rajan had said, "There are no free lunches. The ATM transaction is free for you but not for the bank. It costs the bank Rs 75 to Rs 100 for those five transactions." Rajan had clarified that the RBI has only allowed banks to charge customers for ATM use but it is not binding on banks. "If you like your customers to use the ATMs for free, you can subsidise the transactions. What we have done is let large banks make better business decisions, reduce the hidden subsidy and make it more transparent," Rajan had said.

Definitely, the onus is on banks as to what they should do as there could be many hiccups too. "The banks should take additional care and deliver what they promise. For instance, customers sometimes have to run around due to transaction failures at the ATMs. Will the banks compensate?" asks Nirmala Desiken, Trustee of Consumer Association of India.

As competition grows, banks also have to woo customers one way or the other.