ATM transactions may get costlier as operators seek hike in inter-bank fees

The representation is being led by National Payments Corp of India after meetings were conducted separately for private and public sector lenders

In a move that might potentially add some more burden on the common man, the automated teller machine (ATM) operators, especially those of the private banks, are demanding a raise in inter-bank charges for ATM transactions, citing demonetisation, an increased cost of operating the channel, and fewer withdrawals.

The representation is being led by the National Payments Corp of India (NPCI) after meetings were conducted separately for private and public sector lenders.

The inter-bank fee is charged by one bank from another for use of its ATMs by the customers of the other. Any raise in this leads to increased cost burden for banks with smaller ATM networks. If banks pass on part of this cost to consumers, the number of free ATM transactions they are allowed to make in a month at their bank or other banks' ATMs might get reworked.

According to a Livemint report, the demand for raising the rate is being led primarily by private sector banks. Some large public sector banks are against an increase as it would lead to higher costs for them.

A banker from one such large public sector bank was quoted as saying that their charges were already high and if they increased it further, they would be bound to lose. Once they have ascertained the costs, they would discuss it with the stakeholders and fix the rate, he added.

The banker said because private sector banks started putting up ATMs before the public sector ones, the former have a locational advantage but he admitted that the security charges and recalibration of machines due to the issue of new currency notes have led to additional costs for all banks.

Following demonetisation of high-value currency notes and the increase in digital transactions, ATM usage has declined drastically, leading several banks to rationalise their ATM network.

Another reason for seeking the fee hike is that ATM companies are now under stress and think that the management of the machines have increased and not much deployment is happening.

A banker from Union Bank of India was quoted as saying that even though minimum wages of security guards or monitoring charges had shot up, the inter-bank charges had remained the same. The increase they were seeking was marginal, he added.