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Central bank draft paper brings cheers to ATM users

Mumbai, Dec. 24: The Reserve Bank of India (RBI) has proposed that cash withdrawal fees for customers using ATMs of other banks be reduced to Rs 20 per transaction by March 31, 2008.

This fee should be brought down to zero from April 1, 2009, the RBI said in its draft paper on norms for automated teller machines (ATMs) released today.

For balance enquiries at ATMs of other banks, customers should not be charged any fee at all, while for own ATMs no charges should be levied for any purpose.

There are now more than 31,000 ATMs in the country.

Cash withdrawal and balance enquiry charges range from zero to Rs 57 per transaction when customers use ATMs of another bank. These charges depend on the arrangements between the bank owning the ATM and the customer’s bank.

According to the central bank, the charges should reflect the interchange fee and the switching fee.

The interchange fee is recovered by the bank owning the ATM from the bank whose card is inserted into the ATM. The switching fee is levied by entities such as Visa, MasterCard.

Banks with a large ATM network treat interchange charges as an important source of revenue.

Data collected by the RBI from various banks show the interchange fee per transaction to be in the range of Rs 10 to Rs 20 for withdrawals and Rs 5 to Rs 8 for balance enquiries. The switching fee varies from nil to Rs 3 per transaction.

The Reserve Bank, in the approach paper towards fair pricing and enhanced access vis-à-vis ATMs, said, “The ideal situation is that a customer should be able to access any ATM installed in the country free of charge through an equitable co-operative initiative by banks.

“The process may be ensured, if necessary, by regulatory intervention by way of setting service charges considered reasonable,” it said.

The paper said that in countries such as the UK, Germany and France, bank customers have access to all ATMs for free, except when cash is withdrawn from ATMs that are managed by non-bank entities.

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