Come Jan. 1, You May Want To Make Fewer Trips To ATMs
How do ATM charges change come Jan.1, 2022? Will it impact consumer behaviour?
Digital payments may have already reduced the frequency with which you go down to the ATM. Come Jan. 1, 2022, each of these trips may cost you a little bit more.
From Jan.1, banks can charge a maximum of Rs 21 per transaction beyond the free transactions permitted compared to Rs 20 now.
Five free transactions are permitted in metro cities at ATMs of your own bank. Customers are also eligible for three free transactions at another bank's ATM in metro cities and five free transactions in other centres.
Alongside an increase in customer charges, starting August, the RBI allowed interchange charges to be increased from Rs 15 to Rs 17 per transaction for financial transactions. The interchange fee is the charge levied between banks for card transactions.
Already since the start of the Covid-19 pandemic we have seen customers withdraw a higher amount with every ATM transaction, said Navroze Dastur, general manager for South Asia, NCR Corporation. Due to this we may see a slight increase in the withdrawals, he said.
The rate has also only gone up by Re 1 per transaction, after the free transactions are completed. It is unlikely that the customers will have too much of an issue with the new cost structure.Navroze Dastur, General Manager - South Asia, NCR Corporation
The change in charges on ATM transactions came after nearly seven years. It was in 2014 that the RBI last reduced the number of free transactions available in metro cities at ATMs of other banks. It also permitted banks to charge up to Rs 20 from their own customers for ATM services beyond five free transactions.
Interchange charges were last reviewed in 2012.
Over the years, the changes in fee structure and fewer free transactions have led to a drop in the number of transactions but an increase in the average transaction size.
"While the number of transactions has gone down significantly in the last four to five years, the average value of money withdrawn has equally gone up," said Jaikrishan G of Grant Thornton.
It shows that customers became conscious about the charges and curbed small transactions that ranged from a few hundred rupees to a couple thousand.Jaikrishnan G, Head Of Financial Services Consulting, Grant Thornton Bharat.
In raising fees and interchange charges, the regulator is trying to balance out the needs of the industry with those of customers.
Non-remunerative business models have meant that the number of installed ATMs have stagnated in the country. According to a 2020 report from the RBI on ATM fee structures, the ATM network in India has barely grown after 2016.
Dastur said the slight increase in charges and the number of free transactions balance the interests of consumers and industry.
"Customers now have five free transactions on their own bank's ATMs and three outside their bank's network. If someone goes to an ATM eight times a month, we feel that is good enough," said Dastur. "The customer's needs are taken care of and the industry does not get impacted either."
Jaikrishan G of Grant Thornton agrees. "ATM's fees were entirely subsidised earlier, but the model was proving to be unsustainable because it gave little incentive to banks or operators."
Alongside higher fees and charges, banks and ATM operators are trying to improve the utilisation of ATMs.
"While they can't fully replace a branch, ATMs can extend a host of services round the clock," Jaikrishan said. "Recyclers, or machines that can deposit as well as dispense cash, are now widely used to improve accessibility and reduce operational costs of filling machines sooner."