RBI committee on ATMs

RBI committee on ATMs

ATM Services

A Reserve Bank of India (RBI) committee on ATM fees had recommended charging customers for every withdrawal above ₹5,000, according to a copy of an unreleased report obtained through a Right to Information (RTI) query.

  • A committee headed by V.G Kannan, former Chief Executive of Indian Banks’Association submitted its report on 22nd Oct ober 2019 recommending that in order to”To discourage high cash withdrawals from ATMs, only cash withdrawal transactions up to (and including) ₹5,000 to be considered for free transactions. However this report was never released.
  • Also, the public information officer (PIO) had rejected the request saying it was held by RBI in fiduciary capacity and was exempt under Section 8 (1) (e) of the RTI Act. The report of the committee to review ATM interchange fee structure was made available only after an appeal against the RBI response.
  • It was further stated that Fiduciary capacity does not arise in this case, as the committee itself was formed by RBI and announced as part of Monetary Policy Committee on 6 June, 2019. This being a committee report, should be made public, as with other committee reports of RBI as agreed by the first appellate authority.
  • The report had suggested that the cost of operating ATMs has gone up whereas the interchange fees and the cap on customer ATM usage charges has not been reviewed since 2012 and 2008, respectively. The committee had also expressed concern over the lack of new ATM deployments especially in semi-urban and rural centres.
  • The report had recommended using population as a metric for calculating ATM charges. For instance, it suggested
    • An increase in free transactions at ATMs in all centres with population of less than 1 million (as per census 2011 and to be reviewed from time to time) to six per month, from five at present.
    • For centres with higher population, the free transaction limit shall be retained at three.
    • Also, the committee was in favour of increasing the upper limit of customer charges by 20% to ₹24 plus taxes, per transaction after the expiry of the free usage limit.
    • On the interchange front, for ATMs in all centres with population of 1 million and above the interchange should be increased by ₹2 to ₹17 for financial transactions and to ₹7 for non-financial transactions.
    • For locations with population of less than 1 million, the charges are recommended to be hiked by ₹3 in both kinds of transactions to increase greater penetration of ATMs.

Interchange Charge:

  • ATM interchange is the charge paid by the bank that issues the card to the bank where it is used to withdraw cash.
  • While the card-issuing bank is called the issuer, the latter is called an acquirer.
  • This charge is divided between the acquirer and the company maintaining the ATM and this is the reason why banks discourage customers from using other banks’ ATMs.
  • There is a conflict on the fee issue between banks and ATM deployment companies, with the latter seeking a hike in the fees to ₹18 per transaction from ₹15 at present.

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