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Cash withdrawals from ATM may become expensive

by Raju Vernekar
0 comment 3 minutes read

IT Correspondent
Mumbai, July 5:

Drawing cash from ATMs is likely to become expensive in view of an anticipated increase in “inter-change charges” (the charge paid by the bank that issues the card) for all transactions over Rs 5,000 carried out on automated teller machines (ATMs) across the country. 
At present the customers can withdraw Rs 10,000 in single transactions 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, Chief Executive, Indian Bank Association (IBA), set up by RBI in June 2019, has recommended capping withdrawal from ATMs to Rs 5000 and levy chares for larger amounts. It has recommended an increase of 16 per cent ( Rs 2 to Rs 17) for financial transactions and to Rs 7 from Rs 5 for non-financial transactions, at ATMs in all centres located at places when the population is one million and above. RBI is expected to implement the recommendations of the committee soon. 
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. Besides, 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). 
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.
 However 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.
 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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