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Personal Finance Exclusive
ATM Charges: When RBI acts as ‘toothless’ tiger

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.

 

User

COMMENTS

Prince Karikkassery

9 months ago

HDFC has issues Platinum card with daily withdrawal limit of 100000 but it will cost Rs.100 if you wish to keep the 5 free transactions for your normal use. This is cheating

pp

2 years ago

NOTE for RBI to think of :--

Why 3-4 ATMs in a street from different banks ?

Why all the bank don't make a common group to maintain ATMS ?

In this way only 1 ATM in a street and maintaince wil also be less to bank.

Unnecessary putting chanrges on customers insted of tring to find how can stop big money spending by maintaing ATMs in the same street where 3-4 other ATMs are already working .

AJOY KUMAR SARAF

2 years ago

Banks employees have their own way of doing things.
I went to SBI MVM BLR-3 branch to deposit cash for deposit in CBS Piparia MP br and was told by lady NO CASH Accepted without ATM card by counter. still since I had a token I tried to go to the counter which was alloted to me by system and the genlteman behind without blinking took CASH and gave receipt ,
why the banks should refuse to accept cash for same bank CBS branch

Iqbal Ahamed

2 years ago

Robbing the Poor and Paying the Rich.

B SHANMUGANATHAN

2 years ago

IN A WAY RBI IS RIGHT, AS SOME PEOPLE WITHDRAW Rs.100/- OR SO EACH TIME / DAILY TWICE, etc. & THEY VERIFY BANK BALANCES OFTEN ( as other people would have assured to deposit money in their a/c ).
AT THE SAME TIME, RBI HAS TO CONSIDER RURAL / VILLAGE CUSTOMERS. SOME VILLAGERS HAVE TO TRAVEL A FEW KMS FOR ANY BANK ATM TRANSACTION. IN THAT CASE, OTHER BANK TRANSACTIONS WILL INCREASE.
HENCE, CAP ON ATM TRANSACTIONS/ AMOUNT WITHDRAWN IS ALSO REQUIRED ( say double & minimum withdrawal of Rs.300/- or so ).

REPLY

Babubhai Vaghela

In Reply to B SHANMUGANATHAN 2 years ago

May Google SBIAGM2013 to read Shareholder concern and questions asked in the SBI AGM by me covering varieties of issues concerning Banking working including ATMs and Top Loan Defaulters.

Sunil Tambe

2 years ago

As what I see it; if banks are so starved for profits by these meager and mean ways; what's happening to those written-off bad debts and defaulters like Mallyas,Hiranandanis,and those big sharks who have duped banks for Hundreds and Thousands of Crores.

Pathetic.....

Manoj

2 years ago

It is foolish to think that regulators have no public accountability, and equally foolish for those who track developments in the field of economy, to expect Raghuram Rajan to leave even vestiges of sanity in the well regulated indian banking system - he's destroying yet another public institution that was respected highly among globally.

And the irony is, this is allowed to continue despite the change of government to an avowedly nationalist, anti-corruption set of ministers.

REPLY

Dhoot Usha

In Reply to Manoj 2 years ago

Who will bell the cat?????????

Babubhai Vaghela

In Reply to Dhoot Usha 2 years ago

We the People through Varieties of Means. We are not Helpless. We must show our Collective Might to the Banks & RBI Abusing Positional Power.

AJOY KUMAR SARAF

2 years ago

ATM Card usage charges for more than specified is now levied.
No one can stop it as RBI is hell bent to improve banks profits.
Next in line will be SWIPE YOUR CARD ON ENTERING BANK BRANCHES AS WE DO IN ROAD TOLL PLAZA. because customer will use banks facility like AC ,Toilets and Chairs which are for Staff ONLY.
Hats off to toothless and senseless RBI

SUNIL MORE

2 years ago

In view of SBI manadate for unlimited free usage if balance is more than 25000 they are forcing people of lessser income or say maintaining lesser balance to come in the banks and stand in the queue for withdrawl of there own money and incresing pressure on there own employee and increse use of cheques for withdrawl of money moneylife shold go ahead with petition in public interest against IBA and RBI

niranjan sukhlecha

2 years ago

it should be roundly condemned as firstly they are already saving on hiring staff to service client or secondly to let general public keep and hold cash rather than drive all schemes through banking channels.

Kisalay Somani

2 years ago

I see a day soon in the near future wherein one will be charged even for online banking - citing it as a risk to the bank citing "Fraud Risk". We are all going the developed country way (read US) wherein the central bank screwed the system so much that the average citizen barely has any choices left. Most large banks expect you to maintain $1,500 for a savings account (checking in their parlance) to avail free services, else a monthly maintenance fee for owning a bank account. Beat that. I am sure that model is not far away.

sahil

2 years ago

This is to just harrase the middle class people and to make money for the bank if they cant afford the Atm maintenance they cant have the rights to say no atm withdrawl charges when opening the bank account.

SuchindranathAiyerS

2 years ago

In a nation that enshrined exceptions to the rule of law and inequality under law in the Constitution all those many decades ago, all demands for justice and equity are just quibbling under the wider umbrella of "political risks" i.e. extortion (corruption), reservations, incompetence and non accountability. All that on can say of the Indian State is that it is as secular as ISIS and just as predictable!

MOHAN SIROYA

2 years ago

I feel, our system is already wary of such persons who say"Sab Chalta Hai". What is wrong ,if you pay. Yes, it is your money and to draw your own money You Pay what is wrong ?
Let me clarify that to have more ATMs at a particular place or not is purely the Bank's decision who keep ATMs there .Because they reap profit from what they are spending. I know a main artillery road where in one complex in a row ,there are FIVE ATMs. I wondered why? On investigation it transpired that 3 ATMs who are maintaining machine well, are getting an average of 500 foot falls per day. Other two having primitive machines also get an average of 300 Footfalls a day. Now multiply that by Rs. 20( The customers there are 95 percent of other banks)how much big money they are earning per day. Let us keep our ears and eyes open.

MOHAN SIROYA

2 years ago

I feel, our system is already wary of such persons who say"Sab Chalta Hai". What is wrong ,if you pay. Yes, it is your money and to draw your own money You Pay what is wrong ?
Let me clarify that to have more ATMs at a particular place or not is purely the Bank's decision who keep ATMs there .Because they reap profit from what they are spending. I know a main artillery road where in one complex in a row ,there are FIVE ATMs. I wondered why? On investigation it transpired that 3 ATMs who are maintaining machine well, are getting an average of 500 foot falls per day. Other two having primitive machines also get an average of 300 Footfalls a day. Now multiply that by Rs. 20( The customers there are 95 percent of other banks)how much big money they are earning per day. Let us keep our ears and eyes open.

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