Monetary policy review: Soon, withdraw cash from any ATM using UPI

Cardless cash withdrawal, which was offered only by a few banks, will now be made available across all banks and ATMs. It will be available via the Unified Payments Interface (UPI), which will be used for customer authorisation. This is expected to enhance ease of transactions and eliminate frauds at the same time.

On Friday, the Reserve Bank of India (RBI) said, “To encourage cardless cash withdrawal facility across all banks and ATM networks, it is proposed to enable customer authorisation through the use of UPI. Settlement of such transactions would happen through the ATM networks. Separate instructions would be issued to NPCI (National Payments Corporation of India), ATM networks and banks shortly.”

RBI governor Shaktikanta Das said, “In addition to enhancing ease of transactions, the absence of the need for physical cards for such transactions would help prevent frauds such as card skimming and card cloning, among others.”

“The proposal is to use UPI for authentication. Through this, customers can withdraw money from any bank’s ATM or white-label ATMs. We are working out the systemic changes that may need to be done. The issues will crystallise in 2-3 months,” said T Rabi Sankar, deputy governor, RBI.

When all banks and ATMs start offering this service, customers — when they visit ATMs — will find an option of UPI-based cash withdrawal. Once the amount is keyed in, it will generate a QR code.

The customer then needs to scan the QR code and enter the pin on their UPI app and cash withdrawal will be executed. This gives an alternative to customers so there is no overdependence on one system, said a source.

There will be no change in the interchange fee structure, he said.

UPI will only act as a messenger while the settlement will continue in the national financial switch (NFS) network, the source added.

Dinesh Kumar Khara, chairman, State Bank of India (SBI), said, “The measures to allow interoperability in card-less withdrawal at banks will give a further impetus to QR code-enabled payments.”

According to Sumit Gwalani, co-founder, Fi, a neobank, one of the biggest contributions of UPI was facilitating a standardised flow for secure authentication to a bank account.

While this will increase convenience for customers and reduce frauds, experts have raised a point that this may have an impact on the debit cards.These cards are primarily used for the purpose of cash withdrawals, at least in the smaller towns and rural areas.

“There could be a potential first-order impact on debit cards as this step would reduce the need to carry debit cards. There could be a potential second-order impact on other payment forms such as credit cards and wallets since this step seems to promote ubiquity of the UPI. Prima facie, this step seems negative for MDR fee-generating payment form factors,” said Shivaji Thapliyal, lead analyst — institutional equities, YES Securities.

Governor Das clarified — in the post-policy press meet — that the issuance of debit cards will not stop owing to this. This is because there is a lot of other usage of debit cards other than cash withdrawal.

“There may be an impact on the debit card usage because those who are able to use UPI outside will be able to use it to withdraw money from ATMs. Its usage will go down. However, due to other intertwining dependencies built in the banking system for authorisation at call centres or Internet Banking and change of PIN for UPI, the issuance of debit cards may not reduce”, said Anand Bajaj, founder, MD & CEO, PayNearby.

Currently, there are over 935 million debit cards in the country. Of this, over 316 million debit cards are held by Jandhan account holders.

“RBI continues to play a pivotal role in bringing in advancements in the digital banking space, keeping customer convenience at the forefront. RBI’s mandate to enable interoperable, cardless withdrawal using UPI across ATMs is a welcome step in enhancing customer convenience and safety of cardless ATM withdrawals,” said K. Paul Thomas, managing director & chief executive officer of ESAF Small Finance Bank.