Reserve Bank of India has recently permitted withdrawal of cash upto Rs.1 000 per day through debit cards issued in India from point of sale (PoS) terminals.

The PoS are expected to dispense cash at a commission of 2% (yet to be decided) and this service charge would be shared between the card provider, the bank and the PoS establishment.

Reserve Bank of India has further ordered that this facility may be made available at any merchant establishment designated by the banks after a process of due diligence.

Banks have welcomed this step, as according to them this is a means of promoting financial inclusion and It is a customer centric step.

At present the customers of banks are allowed to withdraw cash from ATMs only. There are currently 44,857 ATMs in the country and 470,237 PoS terminals in the country.

This should be a welcome move for banks in metro cities confronting prohibitive real-estate costs and in small towns with sketchy business potential.

This may help banks gain new customers. Merchant outlets too would benefit from a share of the service charges and from the potential business that customers tempted by appropriate advertising and discounts would generate with their debit cards.

While no date is fixed for starting this facility, RBI has stated that it would depend on bank managements in taking their board’s approval and firm up the mechanism.

Though this is a welcome step, banks should approach this with care and caution. Banks should be well advised in advance to take adequate precautions.

The list of precautions could include:

- Selection of PoS

- Avoid manual intervention at PoS

- Authentication and verification of the card

- Cash dispensation to be effected through a machine (a smaller version of ATM) ?

- Real time capture and accounting of these cash withdrawals through PoS

- Do we need any other additional identification of the account holder other than the Debit Card?

- Steps to overcome the usual credit card / debit card frauds / crimes in the market place

- Who should bear the proposed commission (2%?). Normally the account holder. However this may be a sizeable amount in the case of rural customers

This facility should not prove to be yet another problem area for the already stretched bankers.