3rd party ATM curbs to trouble customers

The Reserve Bank of India’s (RBI’s) decision to end the free run at automated teller machines (ATMs) is going to come with a lot of troubles for bank customers. The only thing that’s clear is the October 15 deadline for the end of free third-party ATM use.

So, in six weeks, customers would have to pay as much as banks want them to if they use a third-party ATM more than five times a month. In April 2008, RBI had decided to cap charges at Rs 20 per transactions and from April this year, withdrawal as well as balance enquiry at any ATM came free.

Even on the issue of how much cash can be withdrawn from a third-party ATM, there is no unanimity. While Indian Banks’ Association (IBA), the industry lobby, decided to cap withdrawals at Rs 10,000, there are players such as Axis Bank, which have not decided if they would enforce the ceiling on withdrawals.

“We are seeking clarification on whether we need to limit the maximum amount that a third-party customer can withdraw from our ATMs at Rs 10,000,” said a senior bank executive said.

Axis Bank, which had seen more customers from other banks flock to its ATMs than its customers shift to others’, is seeing an opportunity in generating resources through inter-change fee.

Bankers, however, said that State Bank of India (SBI), which has a network of around 14,500 ATMs, would be the biggest beneficiary from the ceiling imposed on free third-party transactions.

Sources involved with the decision said that SBI argued for capping the amount one could withdraw from third-party ATMs as the average withdrawals from its ATMs were of the order of Rs 4,000. Since the free ATM rule came into force, SBI has been witnessing nearly 350 transactions per day at its ATMs, compared with the industry average of 150-200. What added to its woes was the decision of some foreign banks to allow their high net worth clients to withdraw up to Rs 1 lakh a day, compared with Rs 15,000-25,000 for most banks.

With the largest ATM network in the country, the public sector player had to deal with a situation where it lost interest on funds withdrawn from its cash dispensing machines by customers of other banks. Besides, there were logistical issues since it had to pump in more cash as it depends on in-house arrangements to replenish cash, especially in far flung areas.

The decision to put an end to free ATM use was taken at a meeting chaired by RBI Executive Director G Gopalakrishna in June, but a formal announcement was made on last Friday.