RBI cuts ATM fees on cash withdrawals

The Reserve Bank of India on Monday asked banks to limit charges for customers using automated...

The Reserve Bank of India (RBI) on Monday asked banks to limit charges for customers using automated teller machines (ATMs) of other banks to Rs 20 per transaction from March 31. This service should be offered free of cost to customers from April 1, 2009, the RBI said.

Banks can, however, levy charges determined by themselves for withdrawals using credit cards and from ATMs located overseas, the Reserve Bank said.

Customers can now make balance enquiries at ATMs for free and will be levied a maximum fee of Rs 20 per transaction for withdrawals, that too till March next year after which such usage would be not be charged. This would be irrespective of the amount and the bank where the customer holds the account. In a circular issued to all commercials banks, RBI also said that customers would not be charged for even cash withdrawals at other bank ATMs with effect from April 1, 2009. It said that banks cannot charge its own customers for any ATM usage, with immediate effect, while they would have to cut down cash withdrawal charges for other banks’ customers to a maximum of Rs 20 per transaction by March 31 this year.

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The RBI said that the framework on ATM usage charges have been decided after analysing the public comments received on an Approach Paper released by it on December 23, 2007.

The RBI has clarified that for two services — use of own ATMs for any purpose and use of other bank ATMs for balance enquiries — the customers will not be levied any charge under any other head and the service will be totally free. It also said that charge of Rs 20 for cash withdrawn at other bank ATMs will be “all inclusive and no other charges will be levied to customers under any other head irrespective of the amount of withdrawal.”

The Reserve Bank said that ATMs have gained prominence as a delivery channel for banking transactions in India and by the end of 2007, the number of total ATMs in the country stood at 32,342. To increase the usage of ATMs as a delivery channel, banks have already entered into bilateral or multilateral arrangements with other banks to have inter-bank ATM networks.

While noting that the charges levied on the customers vary from bank to bank and according to the ATM network used for the transaction, RBI said that “a customer is not aware, before hand, of the charges that will be levied for a particular ATM transaction, while using an ATM of another bank.”

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“This generally discourages the customer from using the ATMs of other banks,” RBI said in the circular, adding that “It is, therefore, essential to ensure greater transparency.” The RBI also noted that internationally in countries like the UK, Germany and France, customers have access to all ATMs in the country free of charge except when cash is withdrawn for “white label ATMs or from ATMs managed by non-bank entities.”

Taking note of an international move to regulate the fee structure by the regulator from the public policy angle, RBI said that “the ideal situation is that a customer should be able to access any ATM installed in the country free of charge through an equitable cooperative by banks.”