Now pay additional Rs 20 from sixth ATM transaction onwards every month

NEW DELHI: Soon, visiting an ATM will not be just be about remembering your PIN, but also keeping count of the number of transactions and the machine on which you last transacted. The Reserve Bank of India's capitulation to pressure from the banks has meant that individuals — some of whom maintain deposits running into thousands in their savings bank accounts — are likely to pay Rs 20 from sixth "transaction" onwards every month.
And, RBI's definition of "transactions" goes beyond cash withdrawals to include balance enquiries, placing cheque book request or recharging your mobile phone.

"...taking into account the scope for cross-subsidization and with a view to ensuring more transparency in the pricing of these transactions, banks have been advised to provide their savings bank account holders with at least five free transactions per month at their own ATMs. Beyond this, banks may decide to levy transaction charges (not exceeding Rs 20 plus applicable taxes per transaction) which are decided in a transparent manner," the regulator said in a circular meant to "rationalize the number of free transactions". This came with an advisory that the number of free transactions on ATMs set up by other banks had been reduced to three, from five earlier, in Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad.


So, if you live in these cities, you can do eight free ATM "transactions" a month, unless your bank decides to provide a little more flexibility.

With banks themselves discouraging customers from branches, individuals have got used to cash withdrawals at regular intervals from ATMs to meet their spending needs. For many, stashing their wallets with wades of cash is clearly a thing of the past and passbooks are something that belonged to a different generation. By all accounts, most Indians do more than five transactions at ATMs.

But thanks to RBI's "rationalization" drive, several people may now headed back to bank branches and some of the activities that had moved to ATMs — such as mobile recharges — will once again be done in cash. The move is expected to help banks generate more fee income as there is a cap on the number of free cheque leaves and several banks charge a fee on brach visits for specific purposes.

RBI officers could not be reached for comment on Independence Day, but in its circular issued on Thursday evening the regulator acknowledged that the move was driven by banks. "Recently, a few banks and the Indian Banks' Association (IBA) had approached the Reserve Bank seeking changes in the extant instructions regarding free transactions at other banks' ATMs. Referring to the growing cost of ATM deployment and maintenance incurred by banks on the one hand as well as the rising interchange out-go due to these free transactions, the IBA had sought the removal of free transactions at other banks' ATMs at metro centres and other large townships in the country," it admitted in the circular.

The latest move marks a near complete U-turn from six years ago when the banking regulator, in a consumer-friendly move, had allowed accountholders to use any bank's ATM without levying any fee. Within months, however, it did away with the facility as banks lobbied hard, complaining that account holders were withdrawing small amounts of cash and increasing the number of cash refill at ATMs. It then capped the number of free transactions at non-home ATMs at five and reduced the cap further on Friday.

Times View

By succumbing to pressure from the banks, the RBI has moved the clock back. When we should be moving towards fewer and fewer transactions at bank branches, the RBI and banks are forcing many people to visit branches to avoid transaction fees. Banks don't really have a financial problem - their balance sheets make that apparent. So they don't have to squeeze every paisa out of their customers. If they have a problem, it's their mounting non-performing assets and that is of their own making. The RBI should be nudging banks to clean up their act in that area instead of helping them extract every last pound of flesh they can from hapless small account holders.