Friday, March 28, 2008

RBI recommends free ATM usage

Most of the banks charge a considerable amount to its customers when they use ATM facilities of a different bank to do transactions on their accounts. I myself have paid amounts to the tune of Rs. 61.80 (Usage Fee: Rs. 55.00, Service Tax: Rs. 6.60, Education Cess: Rs. 0.20) for such usages I have made. Part of this usage fee is paid to the bank whose ATM is been used. Considering the costs involved, I always felt that this is an obscene amount.

The irony is even if one withdraws Rs. 100, he has to pay Rs. 61.80 as usage charge. I wonder why the banks are not charging the usage charge as a percentage of the money being withdrawn, while they charge based on percentage for various other services. For example, processing fee for a service such as Balance Transfer on credit card is a percentage of the amount being transferred. The bank would say that despite the quantity of money being withdrawn from an ATM, the service is used anyway, which involves the same set of procedures and that’s why it’s a fixed charge. But here, my question is, how is it different for the processing fee on balance transfer? Isn’t the service being used and the efforts involved are same for various balance transfer amounts? But then one doesn't need to think too much to understand why the banks charge in percentage for services involving higher amounts!

Thus, reading the minds of millions of bank users of India, the RBI has directed the banks to allow free access to ATMs by April 2009. By March 2008 banks that are charging more than Rs. 20 for using a different banks' ATM will have to bring down the charge to Rs. 20. Also, balance enquiry has to be made available free of cost across all ATMs. In order to bring in transparency to the banking system, RBI has also urged the banks to inform their customers before hand, the amount they shall pay for withdrawing money from a different bank's ATM, which would discourage the customers from using a different bank's ATM.

The RBI has also pointed out that in other countries such as UK, Germany and France, customers can access all ATMs in the country, other than the ones managed by non-banks, free of charge. With this move, the Indian banking system is set for a revolution and importantly more customer focussed, it seems.