NFS banks to pay 80 paise per ATM transaction

Banks on the National Financial Switch (NFS), the largest ATM network in the country, will now have to pay a fee of 80 paise per transaction. The move is, however, unlikely to change ATM withdrawal charges for customers.

In comparison, members of other networks such as Mastercard and Visa pay 10-15 paise per transaction. The National Payments Corporation of India (NPCI) took charge of NFS from the Institute for Development and Research in Banking Technology (IDRBT) in January this year.

IDRBT is a subsidiary of the Reserve Bank of India (RBI), while NPCI is owned by six commercial banks, including State Bank of India.

Since it is a for-profit corporation, NPCI had proposed to charge Re 1 per transaction from January 1, but banks protested this was too high.

After negotiations, a fee of 80 paise was decided, which bankers feel is still high.

“There is a wide disparity between what NFS charges and what other networks charge. The fee should not have been more than 25 paise per transaction,” said a senior executive of a private sector bank.

NFS handles an average of 2.5 million transactions per day and has 37 member banks which have about 50,000 ATMs among them.

Incidentally, the switching charge, which was Rs 2 per transaction until 2007, was waived in December 2007 to bring down ATM interchange charges. The switching fees come as an additional burden to banks who already have to pay whenever a customer uses another bank’s ATM. In April 2009, RBI decided to stop charging customers for third-party transactions.

Banks, on the other hand, incurred heavy expenses on such transactions since they had to pay Rs 18 every time their customer used another bank’s ATM. Previously, this charge was borne by the customer. In October, RBI allowed banks to charge customers for third-party transactions after they had exhausted their quota of five free withdrawals.