Roadblocks mar ATM spread by banks and WLA operators

Financial viability and low interchange fee seen as a huge challenge

Expansion of Automated Teller Machines (ATMs) has slowed this financial year, for quite a few reasons.

High operational costs and differences on the issue of an interchange fee between public and private sector banks has made the financial viability of ATMs tougher.

Reserve Bank of India (RBI) data show between March and June, private banks have added only 607 ATMs. In 2013-14, they'd added a total of 5,366 ATMs. In the same period of March-June this year, PSBs have added 6,240 ATMs; it was 40,772 last year.

The scenario is similar in the White Label ATM (WLA, those owned and operated by non-bank entities) segment. Sanjeev Patel, president of the Confederation of ATM Industry, said: “In the past year and three months, only about 3,500 WLAs have been set up, compared to the 150,000 that need to be set up by operators in three years.”

Currently, the interchange fee is Rs 15 per transaction. This has been recommended to be revised to Rs 16.50, plus service tax, which is Rs 18.48. This is a fee the customer's bank pays to the one that maintains the ATM. The first three transactions at other ATMs are free and after this, the bank can choose to pass on the cost to the consumer. But by RBI order, banks cannot charge consumers more than Rs 20.

Both private sector banks and WLA operators have been asking for the interchange fee to be revised.  

Experts say it takes Rs 7-10 lakh for either a bank or a WLA firm to set up an ATM. And, 120-140 transactions on a daily basis for an ATM to break-even. Those involved say costs have been going up due to higher rentals and need for stepping up security.

Himanshu B Pujara, Treasurer  of Catmi, believes the number of ATM visits by consumers is likely to come down further, making it tougher for ATMs to break-even.

“With the change in regulations (restricting the free use of ATMs each month), the footfalls are set to decrease as people are likely to withdraw higher sizes in one go," he said.