Banks to bear cost of ATM transactions, to go slow on issuing of debt-cum-ATM cards

After the implementation of the Reserve Bank of India directions for the free use of any ATMs for cash withdrawal from April 1 the banks have decided to go slow on the issuing of debit-cum-ATM cards.

As per information provided by top officials of different banks, a bank will have to pay anything between Rs 12 and Rs 18 for every transaction carried out at another bank’s ATM by its customer. An anonymous head of a public sector bank informed Business Line that, “This will mean a big hit on the banks as they cannot be passed on to the customers now. Even abroad, free transactions across ATMs are not offered for the same reason. I don’t see any reason for RBI’s rush to implement this from April 1”.

The big banks like SBI and large private banks might not find difficulty as they will have lesser outgo, but smaller banks having fewer ATMs might find difficult to bear the cost of ‘foreign’ ATM transactions by their customers.

Therefore some of the banks have searched a way out they will be cautious regarding the number of new cards to be issued. The official informed, “We are planning to discontinue giving ATM-debit cards to students and other categories that open loan accounts to cut costs”.

As per sources, most of the banks are yet to work out a mechanism to offer free ATM usage even after two weeks of implementation of the facility as per RBI directives.

Still the ATMs of many private sector banks — ICICI Bank, HDFC and Axis Bank, among some others are continuing to refuse transaction requests from customers of other banks, although they are denying it officially. A senior official of Axis Bank informed over phone from Mumbai that, “From day one, we are accepting all cards at all ATMs”.

The banks are even going to be cautious regarding the expansion of ATM network as the costs may work against this. Head of ATM operations at a large private sector bank informed, “A decision will depend on the cost of transactions at another bank’s ATMs vis-À-vis the cost of setting up new ATMs. Banks with large number of ATMs or very small number of ATMs may rethink their plans”.

Currently the cost of setting up of new ATM amounts to about Rs 8 lakh for installation and Rs 60,000-80,000 towards monthly maintenance expenses. It is expected that this might go up depending on rentals or real estate prices going up.