HYDERABAD: The Reserve Bank of India (RBI) committee on ATM transactions made a few eyebrow-raising recommendations last year. From imposing fee on ATM withdrawals above Rs 5,000 to increasing the interchange fee by Rs 2 each for both financial and non-financial transactions to raising the fee for financial transactions over and above the free transactions to recommending a pouplation-based approach for fixing ATM interchange fee and customer charges, the report covered them all.
The panel headed by V G Kannan, then CEO of Indian Banks’ Association had submitted the report last October, but the central bank hasn’t released the report yet.
However, Srikanth L of Cashless Consumer, a consumer collective focused on digital payments sourced the report through an RTI request and placed it in public domain this week. The panel suggested charging ATM withdrawals above Rs 5,000 in order to discourage high cash withdrawals.
Between April and June 2019, about 66 per cent of ATM transactions were below Rs 5,000. “Banks may levy charges on the customer for every individual transaction above Rs 5,000,” Kannan noted. Similarly, the panel also proposed to raise the cap on financial transactions over and above the free transaction limit by 20 per cent to Rs 24 per transaction from Rs 20 per transaction, excluding taxes.
For ATM transactions in centres with population of above one million, it recommedned the interchange fee to be increased to Rs 17 from Rs 15 for every financial transaction and to Rs 7 from Rs 5 for every non-financial transaction. Likewise, for ATM transactions in centres with population of below one million, the fee would be increased to Rs 18 from Rs 15 for every financial transaction and to Rs 8 from Rs 5 for non-financial transaction. While the cost of operating ATMs shot up in recent years, the interchange fee and the cap on customer ATM usage charges wasn’t reviewed since 2012 and 2008, respectively.
According to the report, the average monthly cost of operating an ATM was between Rs 75,000 and Rs 80,000 per machine. If there were an average of 120 transactions on every ATM a day, the blended cost per financial transaction would be in the range or Rs 15.6 to Rs 16.7. Currently, the blended interchange fee stands at Rs 12.50 including a Rs 15 interchange fee for financial transactions and Rs 5 for non-financial, it noted.
“The usage of ATMs in India by the account holders has gone up considerably over the last decade and half. However, the ATM access in India lags most of the emerging markets and large economies like Russia, Brazil, China, South Africa, US, UK etc with only 22 ATMs being available per 100,000 adults in the year 2017...from last three years new ATM deployments have beeb more or less stagnant due to probhibitive costs of operating ATMs making them unviable,” the report pointed out.
Meanwhile, the report suggested that for centres with population below 1 million, the number of free ATM transaction should be increased from five to six per month, while in metros and satellite towns,
it suggested retaining the exisitng 3 free ATM transactions per month. The same would apply to all centres with a population of over one million and above.
Plan to raise cap on financial transaction
The panel, headed by V G Kannan, then CEO of Indian Banks’ Association proposed to raise the cap on financial transactions over and above the free transaction limit by 20 per cent to H24 per transaction excluding taxes