How transactions at ATMs become expensive: Explained

Aug 19 2014, 14:51 IST
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 Taking out a mini-statement or even changing PIN will amount to a transaction. Taking out a mini-statement or even changing PIN will amount to a transaction.
SummaryCome Nov 1, frequent usage of ATMs will become expensive, with RBI imposing limit of transactions.

COME November, frequent usage of ATMs will become expensive, with the RBI imposing a limit of three transactions — financial and non-financial — per month from ATMs of other banks and five from the same bank in the six metropolitan cities. You will be required to pay a fee of up to R20 for using ATMs beyond the permitted numbers of transactions in Delhi, Mumbai, Chennai, Bangalore, Kolkata and Hyderabad.

Taking out a mini-statement or even changing your PIN will amount to a transaction. The central bank has, however, said that nothing precludes a bank from offering more than three free transactions at other bank ATMs to its account holders if it so desires.

“Recently, a few banks and the Indian Banks’ Association (IBA) had approached RBI seeking changes in the extant instructions regarding free transactions at other banks' ATMs. Referring to the growing cost of ATM deployment and maintenance incurred by banks, on one hand, and the rising interchange outgo due to these free transactions (on the other), the IBA had sought the removal of free transactions at other banks' ATMs at metro centres and other townships in the country," said the RBI circular.

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The central bank has also asked banks to ensure fair and transparent information to customers regarding the new ATM charges and put in place a proper mechanism to track transactions.

ATMs have gained prominence as a delivery channel for banking transactions in India. The number of ATMs increased to over 1.67 lakh in June 2014 from 27,000 in March 2007. During the period, the point-of-sale infrastructure increased from 3.2 lakh to 10.89 lakh terminals. ATMs are being leveraged by banks to deliver financial and non-financial products to customers. Access to third-party ATMs was made free in April 2009. However, following a representation from banks, RBI agreed to cap the number of free withdrawals to five a month and limited the total cash withdrawal to R10,000 from third-party ATMs.

Now, for every transaction that a customer makes at another bank’s ATM, the home bank pays an

interchange fee of R18 per transaction for use of its machines. Currently, banks are not allowed to charge their own customers for use of the ATM network, regardless of the number of transactions. Bankers say each balance enquiry costs the bank R11, while a transaction costs around R18. ATMs are more concentrated in urban areas as people

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