The first ATM (Automatic Trailer Machine) in India was set up in 1987 by HBSC (Hongkong Shanghai Bank Corporation) in Mumbai. In the following twelve years, about 1500 ATMs were set up in India. In 1997, the Indian Bank Associations (IBA) set up Swadhan the first network of shared ATMs which allowed interoperable transactions. Network of shared ATMs means your account is in another bank and you can do ATM transactions with any other bank.
Recently on 10th June Reserve Bank Of India allowed the bank to increase charges for cash and non-cash ATM transactions above the free monthly permissible limit from next year. Bank customers will have to pay Rs.21/- per transaction instead of Rs.20/- with effect from January 1, 2022, if bank customers exceed the monthly limit of free transactions.
Reasons for increasing ATMs charges: To compensate the banks for the higher interchange fee and given the general escalation in costs. They are allowed to increase the customer charges to Rs.21 per transaction. This increase shall be effective from January 1, 2022, the RBI said in a circular.
Recommendations of the Committee in 2019:- The revised charges are based on the report by a committee constituted by the RBI in 2019. Under the chairmanship of VG Kannan, then chief executive of the Indian Bank’s Association (IBA), the committee reviewed the cost and its recommendations were made public in 2020. Using population as a metric for calculation ATM charges the committee had advised.
- The free transactions at ATMs in all centres with a population of less than 1 million (as per census 2011) should be increased to six per month, from five at present.
- For centres with more population, the free transaction limit should be retained at three.
- For locations with a population of 1 million and above centres ATMs, the interchange rate should be increased to Rs.17 financial transactions and Rs.7 for non-financial transactions.
- For locations with a population of less than 1 million the charges should be hiked by Rs.3 in both kinds of transactions.
The free transaction provides from banks: However, customers will continue to be eligible for five free transactions (financial and non-financial transactions) every month from their own banks ATMs but they would be able to do three free transactions from other bank ATMs in metro centres (Delhi, Mumbai, Calcutta, Chennai, Hyderabad, Bangalore) and five in non-metro centres. So non-metro customers have a total of 10 free transactions in a month and metro customers have 8 free transactions in a month.
Interchange fee increases: Also, effective August 1, 2021 banks are allowed to increase interchange fees per transaction from Rs.15/- to Rs.17/- for financial transactions and from Rs.5/- to Rs.6/- for non-financial transactions in all centres, informed in the RBI circular.
An interchange fee is an amount that a card-issuing bank pays to ATM operators in case its customers use ATM that does not belong to it.
The ATM interchange fee has been a bone of contention between banks and ATM deployment companies. The charge is divided between the acquirer and the ATM companies. This is why banks are issuing ATM cards to discourage customers from using other banks ATMs so that a bank does not pay charges to other banks or ATM companies.
Availability of ATMs in India: In India more than 1,15,605 onsite ATMs and 97,970 offsite ones as of March 31, 2021. About 90 crore debit cards issued by different banks were outstanding at the end-March 2021. That apart, the number of white label ATMs stood at near about 25,013. India’s rural areas about 20% ATMs available of all account and according to the world bank, India has 20.95 ATMs per 100,000 adults as of 2019, lower than several other nations.
Discuss White Level ATM & Brown Level ATM:
White level ATMs are operated by non-bank entities. Any non-bank entity with a minimum net worth of Rs.100 crore, can apply for white level ATMs. These ATMs does not have a bank logo but their company’s logo.
When banks outsourced the ATM operations to a third party. The ATM is owned and operated by a private company. This type of ATM has the logo of that bank and their RBI is not directly involved.
Future opportunity: As the interchange fees increases, private ATM deployers as well as bank, will get a good boost and there will be significant penetration of ATM services in India’s non-banked regions. A lot of banks are not deploying ATMs in smaller towns and rural areas without commercial sense. The demand for cash withdrawals among consumers has not gone away and one obvious support for that is the way cash in circulation has been growing. Experts believe there is enough demand for cash withdrawal as a service.