Small banks cash in on open ATM rule

The free cash withdrawal facility from automated teller machines (ATMs) has proved to be a boon for banks with small networks as customers of larger banks have moved to them.

So, players such as ICICI Bank, the country’s largest private sector player, are incurring a monthly outgo of Rs 4-5 crore in the form of payment of interchange fee to other banks.

An interchange fee of Rs 18-20 per transaction is paid when a bank’s customer uses the ATM of another bank. While banks were charging customers for cash withdrawals and balance enquiry at third-party ATMs, from April 1, the charges cannot be passed on to customers.

The country’s largest lender, State Bank of India (SBI), has seen an equal number of its customers using other machines as the number of other banks’ customers using its ATMs, according to deputy managing director for information technology R P Sinha. “The total number of transactions at our ATMs have gone up by more than 100 per cent since April 1. However, our customers are also using other ATMs, depending on convenience,” Sinha added.

In contrast, smaller players are seeing customers come to them. For instance, Dhanalakshmi Bank said the increase in transactions, which are of the order of 50 per cent, was largely driven by customers from other banks.

“Often, ATMs of large banks have long queues outside them and if our ATM is just next door, there is a spillover into our ATMs,” said the bank’s Managing Director and CEO Amitabh Chaturvedi.

YES Bank, which has 216 ATMs, did not quantify the increase but its country-head for cash management and direct banking said there was a significant increase in the number of transactions and positive inflows from interchange fees. “We had apprehensions about the (free ATM use) rule, since we have a significant number of no-frills account-holders, who have no minimum balance requirement. However, so far we have seen positive interchange flows,” said T S Jagadeesan, General Manager, Planning.

Among the banks with large networks, Axis Bank is seeing positive cash flows from the ATM business. “Since April, both the number of interchange transactions we have acquired and cases where our customers have gone to other ATMs have gone up by 100 per cent. However, we were a net acquirer even before the rule came into force and so are interchange revenue flows are positive,” said Aspy Engineer, Senior Vice-President of Alternate Channels.