Private banks not game for charging customers for using ATMs

You might not have to pay for using your bank's automated teller machines (ATMs) if you have an account in a private sector bank.

While most public sector lenders favour charging customers for using ATMs more than five times a month even if they transact at ATMs of their own bank, private sector banks are against charging customers.

The difference in opinion was apparent when bankers met Reserve Bank of India (RBI)’s Governor Raghuram Rajan on Tuesday following the central bank's third quarter review of monetary policy.

"There are some dissenting voices with respect to increasing charges for ATM usage. Bankers will have to consider that before taking a final decision," the chief executive of a private sector bank told Business Standard following the bankers' meeting with the governor.

Earlier this month, HDFC Bank's Deputy Managing Director Paresh Sukthankar had told reporters that his bank will not be the first to charge customers for using own ATMs. "We have never charged our customers in the past for using HDFC Bank ATMs. We have not taken a call yet (whether to introduce such a charge). But if there is a general feeling among banks that it is better to have a small charge, then we may have to be a part of that decision," Sukthankar had said.

A few private bank chiefs appeared more decisive on not charging customers for using own bank ATMs. "For our own customers, we are very clear that we will not charge them. I encourage customers to use my ATMs because if you transact with me, you are also keeping your money with us...My target is to grow our savings deposits and ATM is a channel to get these accounts," said Romesh Sobti, managing director and chief executive officer of IndusInd Bank.

Following an attack on a woman customer at a Corporation Bank ATM in Bangalore recently it was decided to strengthen security of ATMs. Banks reportedly would incur Rs 4,000 crore expenses every month for the additional security requirements.

To meet the cost, the Indian Banks' Association (IBA), nudged by state-run banks, had proposed limiting the number of free transactions at own-bank ATMs to five a month. Currently, there is no cap on transactions at own bank ATMs, while customers can use other banks' ATMs up to five times a month without paying a fee.

It has also been proposed that the rate for each ATM transaction (interchange fee) be raised. The interchange fee is the charge paid by one bank to another for acceptance of card-based transactions.

"Our initial bias is not to introduce any new charges on ATM usage. We will evaluate the actions of competitors and review our cost structure before charging customers for using our ATMs," Shyam Srinivasan, managing director and chief executive officer of Federal Bank, said. At present, the private lender does not charge its customers even for using other banks' ATMs.

YES Bank also echoed similar views. "We don't want to be the first mover in introducing these charges. At the same time, we cannot be completely different from what others are doing. So, we will wait and watch before introducing these charges," Pralay Mondal, executive director for branch and retail banking at YES Bank, said.