RBI allows free cash from ATM
Customers will now be able to withdraw money fromany automated teller machine (ATM) free of charge from April 1, 2009. ReserveBank of India (RBI) on Monday issued the final guidelines for usage of ATMs,and charges to be collected by banks for accessing ATMs.
Banks that own ATMs charge an inter-change fee for providing the facility tothe customers of other banks. The fee depends on the terms of bilateral andmultilateral arrangements banks enter into with each other. Banks with largerATM networks treat the inter-change fee as an important stream of revenue.
Smaller banks, which already allow their accountholders to access any ATM without having to pay a transaction charge, fear thatthe bigger players, sensing an opportunity, may increase the inter-change feeover the next six months or so.
Players such as Federal Bank, which has 613 ATMs, with a bulk of them in Keralafear the hit to come from the no-frills accounts, where there is no minimumaverage balance requirement.
According to estimates, the average cost of setting up an ATM in urban centresis Rs 7-8 lakh (Rs 700,000-800,000) and the monthly cost of operating it comesto around Rs 50,000-60,000. If the inter-change fee falls below a certainlevel, it will not be feasible for banks to increase the deployment of ATMs,says an executive with a bank with a larger ATM footprint.
While the smaller private sector banks are increasingly looking at ridingpiggyback on the networks of the larger players, public sector banks, which donot have a large presence at present, are going ahead with plans to expandtheir footprint across the country.
"The inter-change fee will be a key factor, but the cost of transactingbusiness through an ATM is significantly lower than through a branch, so wewill continue to expand our ATM business," said George Joseph, chairmanand managing director, Syndicate Bank, which has a network of 1,050 ATMs.
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