Banks to provide free ATM services to 3rd party customers

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Despite hesitation by the banks, the Reserve Bank of India (RBI) has gone ahead to implement policies immediately by which a customer of a bank will not be levied any charge for use of other bank ATMs for balance enquiries.

The customer will have to wait till April 2009 to use other bank’s ATMs free to withdraw money. However the banks which are charging more than Rs 20 per transaction for customers of other banks shall reduce the charges to a maximum of Rs 20 per transaction by March 31, 2008. All the major banks who own a substantially large number of ATMs have welcomed the regulatory move for enhanced access to ATM facility by bank customers, said RBI.

However, some of them have suggested that instead of making the service totally free, number of free withdrawals in a quarter/ month can either be prescribed or left to individual banks. Two banks suggested that certain nominal charges should be prescribed. IBA, in its comments have indicated that banks are in favour of greater financial inclusion and fairness and transparency in levy of charges.

However, banks fear that availability of free ATM services at convenient locations could lead to an increase in the number of transactions and a reduction in the amount withdrawn per transaction. IBA has suggested that the number of free transactions at ATMs of other banks be restricted to two per month. Also in metro centres, the minimum cash withdrawal may be stipulated at Rs 500 for account other than no-frill accounts. Also cap to be fixed for balance enquiry as such transactions also attract interchange. The other suggestions made by banks/IBA are: third party advertisement on the ATMs may be permitted as a revenue stream for the banks, white label ATMs be permitted, cash withdrawal at the point of sale may be permitted so that the load on the ATMs be reduced. RBI has rejected the suggestions on third party advertisement, white label ATMs and cash withdrawal at the point of sale. As regards a cap on the number of free cash withdrawals in a month, the same is neither desirable nor practical, said RBI.