Why has RBI curtailed the number of free ATM transactions (inter or intra bank), only in 6 metro cities?
Answer by Jai Parimi:
Tl;dr: Few banks and Indian Banking Association(IBA) sought the removal of free transactions at other banks’ ATMs at metro centres and other large townships in the country. RBI considered the request after due analysis.
Regarding Usage of ATMs – Rationalisation of number of free transactions, RBI issued a directive under Section 10(2) along with Section 18 of Payment and Settlement Systems Act 2007, (Act 51 of 2007) on Aug 14, 2014 to all banks limiting the number of ATM transactions with effective from Nov 1, 2014.
RBI stated in the directive,
- Referring to the growing cost of ATM deployment and maintenance incurred by banks on the one hand as well as the rising interchange out-go due to these free transactions, few banks and Indian Banking Association(IBA) sought the removal of free transactions at other banks’ ATMs at metro centres and other large townships in the country.
- After an analysis of the ATM deployment in the country as well as availability of alternate means of electronic payment infrastructure and access thereto, it has been decided to revise the existing directions as under:
- Taking into account the high density of ATMs, bank branches and alternate modes of payment available to the customers, the number of mandatory free ATM transactions for savings bank account customers at other banks’ ATMs is reduced from the present five to three transactions per month (inclusive of both financial and non-financial transactions) for transactions done at the ATMs located in the six metro centres, viz. Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad.
- Nothing, however, precludes a bank from offering more than three free transactions at other bank ATMs to its account holders if it so desires.
- This reduction will, however, not apply to small / no frills / Basic Savings Bank Deposit account holders who will continue to enjoy five free transactions, as hitherto.
- At other locations i.e. other than the six metro centres mentioned above, the present facility of five free transactions for savings bank account customers shall remain unchanged.
- ATM installing banks are advised to indicate clearly at each ATM location that the ATM is situated in a ‘metro’ or ‘non-metro’ location using appropriate means (message displayed on the ATM / sticker / poster, etc.) to enable the customer to identify the status of the ATM in relation to availability of number of free transactions.
- Further, banks are advised to ensure the “ATM location identifiers” in their ATM database is accurate and kept up-to-date at all times so as to minimise disputes, if any, in the matter.
- The issuing banks are also advised to put in place proper mechanisms to track such transactions and ensure that no customer inconvenience or complaints arise on this account.
- Accordingly, banks are advised that at least five free transactions (inclusive of financial and non financial transactions) per month should be permitted to the savings bank account customers for use of own bank ATMs at all locations. Beyond this, banks may put in place appropriate Board approved policy relating to charges for customers for use of own bank ATMs.
- The ceiling / cap on customer charges of Rs.20/- per transaction (plus service tax, if any) will be applicable.
- Banks are advised to ensure that the charges structure on ATM transactions, as per their Board approved policy, is informed to the customer in a fair and transparent manner.
- Further, banks are advised to put in place suitable mechanism for cautioning / advising / alerting the customers about the number of free transactions (OFF-US as well as ON-US) already utilised during the month by the customer and the possibility that charges may be levied as per the banks’ policy on charges.