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“Raju Vernekar
vernekar.raj@gmail.com
Drawing cash from ATMs is likely to become expensive in view of an anticipated increase in “inter-change charges” (the fee paid by the card-issuing bank to the bank whose ATM the card has been swiped at. It stands at Rs 15 at present in India), for all transactions over Rs 5,000 carried out on automated teller machines (ATMs) across the country. Currently the customers can withdraw Rs 10,000 in single transaction and Rs 20,000 in a day from the State Bank of India (SBI) ATMs. In ICICI Bank, daily withdrawal limit is Rs 50,000 to Rs 1.50 lakh. For other banks the limit for single transaction and daily withdrawal is different from card to card.
The committee headed by V G Kannan, Ex Chief Executive, Indian Bank Association (IBA), set up by RBI in June 2019, in its report submitted on 22 October, 2019, has recommended capping withdrawal from ATMs to Rs 5000 and levy chares for larger amounts. The recommendation has been made is to discourage high cash withdrawals from ATMs. It has recommended an increase of 16 per cent ( Rs 2 to Rs 17 (from Rs 15) for financial transactions and to Rs 7 from Rs 5 for non-financial transactions (from Rs 5), at ATMs in all centres located at places where the population is one million and above. The Kannan Committee’s report has been obtained by RTO activist Srikanth L although it was not made public by RBI and who is also yet to make clear when the committee’s recommendations would be implemented.
For usage of ATMs in the centres located at places with a population of less than one million, the charges should be increased to 24 % on a blended basis..that is Rs 3 to Rs 18 for financial transactions and to Rs 8 from Rs 5 for non-financial transactions, the committee has recommended. The committee has noted that, the “interchange” does not cover the complete cost per transaction and as such a via media needs to be arrived at between issuing banks and acquiring banks. Increased transactions are expected to offset the difference in cost per transaction and “weighted average interchange”. Further, the White Label ATMs (WLAs) also should make efforts to increase the number of transactions at their ATMs to bring unit costs down.
According to the committee, after normalisation, average monthly cost of operating an ATM will be in the range of Rs 75,000 to Rs 80,000 per ATM, excluding cassette swap. The blended estimated cost (financial and non-financial transactions both together in ratio of 75:25) per transaction, at 120 average financial transactions per ATM per day, comes in the range of Rs 15.60 to Rs 16.70. At 130 average financial transactions, it is in the range of Rs 14.50 to Rs 15.40. This is against the existing blended interchange rate of Rs 12.50 (Rs 15 for financial and Rs 5 for non-financial transactions).
The report, also refers to the RBI circular dated 12 April, 2018, which directed banks to use lockable cassettes in their ATMs which would be swapped at the time of cash replenishment. But the cost per cassette ranged between Rs 14,000 and Rs 21,000, as compared to the Rs 4,000-Rs 8,000 assumed by the RBI. The cost at the minimum is about 2.3 times the cost assumed by RBI, the report said. Similarly the cost per transaction for White Label Operators (WLAOs) is higher as their hits per day per ATM are low compared to bank ATMs. The cost of operating ATMs per month may further rise by about 15%, if cassette swap is implemented. The banks and WLAOs should have a mechanism whereby the incremental cost incurred by them can be recovered over a period of time to ensure viability of operating of ATMs.
These recommendations have been made without taking into consideration the implementation of the cassette swap, which could add another about 15% additional cost. If it is to be implemented, then a commensurate increase in ATM usage charges and ATM interchange should be considered as appropriate, the committee said in its report, while also recommending a review of interchange and customer ATM usage charges at stipulated intervals to be decided by RBI. Despite directions from RBI, over 38,350 ATMs in the country are run on unsupported versions of software or operative systems (OS) of Windows XP, exposing themselves to the risk of frauds and resultant loss.
The report states that the RBI has assumed the average frequency of loading cash at ATMs to be three days, whereas data from top banks indicated that it is almost daily in metros and average two days in rural areas. The increase in cash holdings at ATMs and in transit was estimated at 10-20%, while in fact, the cash holding shall be substantially more in the range 20-25%, the committee found. In the last three years, the number of debit cards has outpaced the growth of ATMs. With a larger number of people accessing bank accounts, due to various financial inclusion initiatives including the Pradhan Mantri Jan-Dhan Yojana (PMJDY) and direct benefit transfers (DBT), there is an urgent need to increase the number of ATMs, the committee has stated.
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