Whipping with 'caps': RBI's ATM torment

The customer-centric banking business has been undergoing various tribulations with PSU and private sector players vying hard to capture their share of the pie. Since automation has taken root, with e-banking and m-banking having become the order of the day, India’s apex banking regulator, the Reserve Bank of India, has come up with rules to keep tabs on the banking sector.

But have these boons evolved into banes, the opposite of what they were intended to be? Looking at the RBI stipulation on putting a cap and additional fees on excessive use of ATMs (Automated Teller Machine), one does get such an impression.

“Given the growth of cash access points and taking into account associated costs of infrastructure to banks and the economy more generally, the Reserve Bank of India has decided to revise the existing directions relating to the use of automated teller machines (ATMs) and charges on their use,” RBI stated in a circular issued in August, this year.

Bank customers are feeling the heat across the country following the recent RBI circular allowing banks to limit the number of free ATM transactions to five — other bank transactions, three in the largest six cities (New Delhi, Mumbai, Kolkata, Chennai, Bengaluru and Hyderabad) and two elsewhere — a month.

Following the directive, which came into effect on November 1, 2014, banks are allowed to burden customers with additional charges of around Rs 25 on excess ATM transactions after the stipulated five free transactions have been completed.

ATMs are primarily used by bank account holders for cash withdrawals. Besides, ATMs also provide services and facilities like account information, cash deposit, regular bill payments, dollar enquiry, donation payment, pin change, purchase of Reload Vouchers for Mobiles, availing of SMS alerts for ATM card transactions, mini/short statements and loan account enquiries. PSU banks primarily focus on dispensing cash while private banks provide other ancillary facilities.

As per latest data from the RBI, at the end of June quarter, there were 1,66,894 ATMs in the country and with 44,929 machines.

In India, one of the earliest ATMs to be introduced was in 1988 in Bengaluru, informed Dinesh Chandra Hegde, a retired DGM of Vijaya Bank, adding, “It was a very proud moment for us (Vijaya bank), as we were one of the first banks to set up an ATM in the country, with help from Citibank.”

In those days, many Indians, including RBI officials, would arrive wide-eyed to have a look at the machine that ‘dished’ out money, an emotional Hegde reminisced.

Since then, ATMs have come a long way in transforming the way people bank. From an era when customers went to the bank, waiting in long queues for their token numbers to be called out for collecting cash, the dawn of ATMs meant that banks went to the customers. The ATM, affectionately stood for ‘anytime money’.

All banks in India today boast of a network of ATMs spread across the country. The existence of hard cash in a machine invites a lot attention, especially from those who want to make easy money (thieves, dacoits and robbers), which requires the ATM kiosks to be guarded and its day-to-day operations closely monitored.

Almost all banks have started ATM operations, with tasks like security, maintenance and cash-filling being outsourced to solid players.
The tyranny of caps...

A few banks have placed caps on ATM usage. The State Bank of India (SBI), which reported losses of nearly Rs 400 crore by way of paying other banks interbank ATM usage charges in 2013-14, was the first lender to cap free ATM transactions at five.

The bank impose fees of Rs 20 on every subsequent transaction. Since November 1, the new norms are effective at India’s largest lender SBI. However, the bank has allowed more free ATM transactions to those who avoid visiting its branches, and unlimited transactions for those with large balances.

The SBI, which possesses the largest number of ATMs in India, started charging Rs 17 for all additional transactions via ATMs. The bank also charges those who avail of the ATM facility without maintaining a minimum balance.

The second and the third largest private sector players — HDFC Bank and Axis Bank, respectively — have also followed suit and, effective December 1, will charge Rs 20 on transactions exceeding five every month.

While HDFC Bank will charge Rs 20 for cash withdrawals and Rs 8.5 (excluding taxes) for balance enquiries or mini statement, Axis Bank will also charge Rs 20 and taxes for carrying out financial transactions and Rs 9.5 for non-financial ones.

At third-party ATMs, HDFC Bank and Axis Bank will charge for more than three transactions, down from the earlier five free transactions, the banks said.

Syndicate Bank, which has 2,916 ATMs going by their Q2 financial statement, allows three other-bank ATM transactions in six metros in the country. “The reduction of free transactions from five to three is not applicable in non-metro centres. It is also not applicable to small accounts/no-frill accounts,” said the bank in a statement.

Even though Syndicate Bank charges Rs 20 per additional transaction in other bank ATMs, there are no restrictions on its customers who use the bank’s ATMs.

An official from Canara Bank said that existing customers of the banks are not penalised for additional transactions. “We provide unlimited transactions for our existing customers. But other bank ATM holders will have to pay Rs 20 in six metros  for all transactions via Canara Bank ATMs,” an official said.

Officials also revealed that the bank encourages its customers to use Canara ATMs more. “If it has not happened, we will have to share the revenues with other banks for each transaction, which is a loss for the bank,” a Canara Bank official said.
Alternative revenue streams
Banking analysts say that growing NPAs and administrative costs have compelled banks to go and find other streams of revenue. Some senior bank managers said they are monitoring the transactions after the RBI guidelines and have tweaked them in line with necessity.

A Bank of Baroda official said, “As far as our bank is concerned, we do not charge customers for their transactions in our ATMs. At present, no charges shall be levied to our customers for using our bank’s ATMs. Our customers can use our bank’s card an unlimited number of times at our ATMs.”

Banks are gearing up to update customers through SMS, emails, displays on notice board, pasting information inside the ATM kiosks, among others.
Bad move

Private Bank officials admit, “It is a bad move from RBI. Customers are certainly not happy.” Moreover, many private banks are halting ATM expansion plans as operating them involves cost. Charges for additional transactions will certainly cover some part of cost.

Customers are forced to withdraw lumpsum money and keep it at home which is not safe. And, a rise in customer visits to bank branches for withdrawals or other non-financial purposes will increase costs, which is much higher than Rs 20, the official added.

Even though technical snags create hindrances in ATM transactions, it has really brought in ease of transaction. “Earlier, for all purposes, customers came over to bank branches. Now, ATMs look after some primary transactions which help save time at the counter. Here, security issues are a concern for the bank. But this (RBI cap) restriction will have a cataclysmic effect and footfalls will really increase,” a manager at SBI said.

Banks are complaining even as RBI looks the other way. Next on the anvil, fresh set of rules which will allow NBFCs to start small banks as part of facilitating greater banking access.

This looks timely given the next phase of economic revival and credit requirements.
However, at a time when banks are also jittery about disbursing credit freely, they will also have to focus on designing open platforms and concentrating on data collation on customer behaviour and how they can fulfil customer expectations.

Financial inclusion is an imperative which requires greater banking access and customer awareness without the penalty component swinging in for no fault of the customer. Is the RBI listening?
DH News Service