SBI, HDFC Bank and Axis Bank have led the move to charge customers for ATM transactions. Moneylife Foundation wrote to the RBI protesting the move, but it made no difference. The RBI however accepted our point that customers often use other bank ATMs because theirs dont function. However, RBI has allowed banks to charge without making any attempt to put a reporting system in place.
The Reserve Bank of India (RBI) has decided to back banks’ move to charge for ATM transactions beyond a threshold limit despite protests by consumer organisations and depositors. In response to feedback and a memorandum from Moneylife Foundation on why these charges are unfair, the RBI ignored all the issues raised on behalf of consumers except the one about non-functioning ATMs. Moneylife Foundation had pointed out that there is no system in our country to report non-functioning and 'out of order’ ATMs that we as customers see almost every time we want to use it. This makes people to hop around and use other bank's ATM that is working. Another crucial issue is the restriction on money withdrawal. If someone needs, let’s say Rs25,000, but the ATM has withdrawal limit of Rs10,000. In this case, the person would end up making all three permitted transactions there only.
RBI’s response: “We thank you for your suggestion about on-line reporting of ‘out of order' ATMs. We advise that we are pursuing the matter with banks through IBA to incorporate ways and means through which customers are enabled to report about ATMs which are not in working condition to the banks.”
Another issue left unresolved is the security of customers while using ATMs. Remember, the brutal attack on a lady manager of Corporation Bank in an ATM booth in Bangalore earlier this year? Yet, banks have been systematically withdrawing security guards in most of their ATMs to save on cost of maintaining ATMs. Most of the ATMs do not have the system of regulating the entry into the ATM booth through the use of ATM cards.
Moneylife Foundation had sent two memorandums to the RBI governor Dr Raghuram Rajan. The one sent on 9 September 2014 on “Usage of ATMs-Rationalisation of number of free transactions”.
The memorandum stated, "The setting up of ATMs by banks is to reduce not only the pressure on their counters, but also to reduce cost of operations through automation. By levying charges for use of ATMs beyond a certain number, banks are scuttling the optimum utilization of technology, thus depriving the benefits of technology to bank customers."
Replying to this, the central bank said, "...we have examined your suggestions and advise that charging for services rendered by banks at their own ATMs as well as the decision to apply differential pricing for cash and non-cash transactions has been assigned to banks which can be decided by them based on their considerations relating to infrastructure deployment, branch expansion etc. However, in order to ensure that customers are not unduly inconvenienced, we have mandated a certain number of transactions to be provided free of charges and have also prescribed the maximum fee that the bank may decide to levy, as per its Board approved policy."
Earlier, in February 2013 MoneylifeFoundation had protested a plan to “Disincentivize Cheque Usage” through punitive levies and charges; the second was in January this year against the move to restrict usage. Both have been ignored in favour of bankers’ lobby.
On 14 August 2014, the RBI had issued a circular restricting the free usage of ATMs by customers. At present, banks have the freedom to decide their charges and interest rates without reference to RBI. Therefore, if some banks found it prudent to curb usage or disallow third-party transactions, they could have gone ahead and done it without RBI’s intervention. So why the RBI directive? To make an anti-consumer action look like a regulatory diktat?
Further, anything beyond three transactions at another bank’s ATM located in six metros, Mumbai, Delhi, Bengaluru, Chennai, Hyderabad and Kolkata will be charged Rs20 per transaction. Those in smaller towns and holders of no-frills accounts will continue to have five free transactions. (Interesting pointer, Hyderabad is considered as a metro when it comes to ATM usage, but taxpayers from this city are deprived house rent allowance-HRA benefits in Income Tax filings saying that it is not a 'metro' city!)
The Indian Banks Association (IBA) is often seen using its influence on the central bank to ensure that angry customers do not vote with their feet and switch banks. Getting RBI to issue a directive removes the problem.
According to the statistics provided by RBI in their website, it is observed that for April 2014, the average amount of withdrawals through ATMs per transaction was of the order of Rs3,146.85, which indicates that the ATM operations are generally done by middle and the lower middle class population of our country. To impose additional charges for withdrawal on such weaker section of our population is unjustified, as most of these have hand to mouth existence.
The same RBI, in 2007 had asked all commercial banks to freeze ATM charges and later on 1 April 2009 abolished it algother. Between 2007 and March 2014, the number of ATMs in the country has gone to over 1.6 lakh from 27,000. Similarly, the number of point of sales (PoS) terminals increased to 10.65 lakh in 2014, from 3.2 lakh in 2007. In addition, the central bank has allowed couple of corporates to set up what are called ‘white-label’ ATMs not owned by banks, but owned and operated by private companies with tie-up with banks.
While earlier, it was private banks that took lead in increasing charges for customers, this time it was the country's biggest, state-run lender. State Bank of India (SBI), in a notification said, customers maintaining average monthly balance of Rs25,000 to Rs1 lakh will get the benefit of unlimited free usage of its own ATMs. However, at other bank ATMs in six metro cities, these customers will be charged beyond three transactions in a month and five transactions in other centres. Customers with account balance of more than Rs1 lakh account balance will enjoy unlimited free transactions at SBI's own ATMs and other banks' ATMs as well.
Private lenders, HDFC Bank and Axis Bank immediately followed suit and capped free usage in above mentioned six metros. From 1st December, both HDFC Bank and Axis Bank would start charging fees on ATMs beyond five number of transactions per month.
HDFC Bank will charge Rs20 for cash withdrawals and Rs8.5 (excluding taxes) for balance enquiry and mini statement, Axis Bank will also charge Rs20 and taxes for financial transactions and Rs9.5 for non-financial ones.