The ATM Revolution!

atm.jpgAutomated Teller Machines (ATMs) have gained prominence as a delivery channel for banking transactions in India. Banks have been deploying ATMs to increase their reach. While ATMs facilitate a variety of banking transactions for customers, their main utility has been for cash withdrawal and balance enquiry. As at the end of December 2007, the number of ATMs deployed in India was 32,342. Commensurate with the branch network, larger banks have deployed more ATMs. Most banks prefer to deploy ATMs at locations where they have a large customer base or expect considerable use. To increase the usage of ATMs as a delivery channel, banks have also entered into bilateral or multilateral arrangements with other banks to have inter-bank ATM networks.

It is evident that the charges levied on the customers vary from bank to bank and also vary according to the ATM network that is used for the transaction. Consequently, 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. This generally discourages the customer from using the ATMs of other banks. It is, therefore, essential to ensure greater transparency. Reserve Bank of India (RBI) in its latest meeting dealt with all these issues related to the ATMs in India.

International experience indicates that in countries such as UK, Germany and France, bank customers have access to all ATMs in the country, free of charge except when cash is withdrawn from white label ATMs or from ATMs managed by non-bank entities. There is also a move, internationally, to regulate the fee structure by the regulator from the public policy angle. 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 initiative by banks.

In view of this, RBI has taken serious and effective measures to simplify and popularize the plastic money. RBI has made the ATM service free for all the customers of the same bank with immediate effect. Also, balance enquiry has been made free of charge from all the banks’ ATMs with immediate effect. RBI also gave guidelines for the much awaited and important issue of withdrawal of money from other bank’s ATM. This was the sole criteria behind the Axis bank, ICICI Bank and SBI’s policy of opening more and more ATMs to provide its customers easy and free withdrawal facility. But curbing down the competition in fee levied on ATM withdrawal, RBI has put up a common fee of Rs.20 on all withdrawals from other banks’ ATMs from April 1, 2008. Also, it is proposed that this facility will be made completely free from April 1, 2009. However, RBI has given the right of deciding fee of cash withdrawal with the use of credit cards and cash withdrawal in an ATM located abroad to the banks.

This policy will surely be a big boost for the ATM system and will be a milestone for the debit and credit card biz. The plastic money, which travelled a long way from being a status symbol to a necessity in urban situations, will find the reforms a benchmark step to show up its reach in the rural areas and far reach regions. This will also help banks in meeting the Basal-2 targets of 2009 and in increasing the credit base. And above all, it will give us relief from multiple cards as we can now do everything with just one card!

Saurabh Sharma

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