Banks Responsible for Failed Transactions and No Cash in ATMs
In landmark judgments, banks have been held as responsible for failed transactions and lack of cash in ATMs, a consumer court, has ruled.
 
With increased use of automatic teller machine (ATMs), many cases are being reported about non-availability of cash and failed transaction in the ATMs. Banks try to shirk their responsibility in such cases and Reserve Bank of India (RBI), which usually bats for the banks, and not customers, in all such generic issues.  
 
It has taken a Consumer Court in Raipur to impose a penalty of Rs2,500, including Rs1,500 as compensation for mental harassment and Rs1,000 for legal expenses, on State Bank of India (SBI) for non-availability of cash in its ATMs, says a report from LatestLaws.com
 
Raipur-based lawyer Rajiv Aggarwal, after failing to withdraw cash from SBI ATMs thrice in April 2017, had filed the petition in the district consumer forum. He also submitted photos and video recording of his failed ATM transactions due to non-availability of cash. SBI tried to put the blame on internet connectivity. However, the Forum rejected the bank’s contention terming ‘non-availability of cash at ATMs’ as ‘deficiency of service’, says a report from DailyPost.in.
 
"When banks can charge for usage of ATMs for a whole year in advance and a client is free to use any of the ATMs, then he automatically becomes a customer, irrespective of the fact, whether he has a bank account in that particular bank or not. Also when customers are penalised for no balance or for not maintaining minimum balance in their accounts, then how can a bank get away with no cash in their ATMs?" the Forum had said.
 
Similar judgments are being passed by few other consumer forums for ATM failures. In January 2018, Akola district consumer forum found SBI guilty of deficiency in services for debiting money from customer's account for a failed transaction. 
 
The complainant Pradeep Shintre approached the Forum, when the bank debited Rs5,000 from his account even though he never received any cash from the ATM. SBI did not appear before the forum, which in its ex-parte order directed the lender to refund Rs5,000 and pay Rs3,000 as compensation and Rs2,000 towards legal expenses to Shintre, says a report from the Financial Express.  
 
It may be baffling that RBI has not woken up and not yet issued a blanket directive to banks but that is how the regulator works. RBI’s recent policy change of asking banks to link floating rate loans to an external benchmark came after Moneylife Foundation filed a public interest litigation in SC submitting this as one of the prayers. 
 
According to DG Kale, former chief general manager for consumer services in the RBI, in the Raipur case, there was denial of service from the bank and hence the consumer forum ruled in the favour of the customer. For the Akola case, he says, “There is a notification issued by the RBI on failed ATM transactions that mandates banks to reimburse the money to the aggrieved customer within 12 working days. As per the notification, the compensation amount should be automatically credited to the customer’s account without any claim from the said customer. If the bank fails to reimburse the amount to the customer within this time, then it is liable to pay a penalty of Rs100 per day till the amount is credited in the customer’s account.”  
 
The main purpose for introducing ATMs was to help customers obtain account related information, cash withdrawals, and deposits without the need to interact with the bank or bank staff. This also helped banks to reduce cost of transaction per customer. However, instead of passing on the benefit of reduction in cost, banks started levying charges on customers for ATM usage. First, they restricted number of transactions and levied charges for additional transactions beyond the free transactions. 
 
Bigger Issues 
 
ATM charges and poor service is only a part of the problem of bank’s attitude to customers and their various charges. Banks are now charging even for failed card transactions or for transactions declined due to insufficient funds. This is applicable not just for ATMs but also for point of sale (PoS) transactions. If there is insufficient balance in the account due to which the transaction is declined, then banks are levying a charge of Rs17 to Rs25, plus goods and service tax (GST), says a report from TheBetterIndia.com.  
 
Banks levy a ‘fine’ if a cheque issued by a customer bounces. In the same manner, these lenders are charging a ‘service fee’ for even checking account balance or even for a failed transaction. Interestingly, the National Payments Corporation of India (NPCI) does not consider failed transaction as complete transaction. Therefore, there is no interchange charged to the card-issuing bank.    
 
Concerned with rising and arbitrary bank charges, Moneylife Foundation has sent multiple memorandums to the RBI governor Dr Raghuram Rajan. One of 9 September 2014 was on “Usage of ATMs-Rationalisation of number of free transactions”  which 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."
 
Nowhere in the world are customers charged for withdrawing money from their own accounts, while the bank earns revenue on their deposits. Banks provide this service to customers because of the spread that they earn between the interest paid to depositors and the rate at which they lend money. The spread has to cover transaction charges.
 
If banks want to start charging on transaction basis, then the spread that they earn on depositors money has to come down. The transaction charges are all the more illogical because in India, the spread on savings bank is one of the highest in the world. In fact, in India, even generally, spread is one of the highest. So in India, banks cannot charge for transactions. But then the bank customers are not organised like the banks’ own cartel and thus get penalised for withdrawing own money.
 
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    COMMENTS

    Ravindran

    2 years ago

    There is one more issue; when ATM of a bank does not work, the customer has to use ATM of another bank which is chargeable beyond 3 transactions. Further, the customer has to pay for conveyance. Hence, ideally, if an ATM of a parent bank does not dispense cash, then the customer should automatically be credited with, say, Rs 100 towards the charges for using other bank ATM as also conveyance if any.

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