Sounding Board. Dealing with higher ATM charges

Two recent moves by the Reserve Bank of India to reduce ATM-related costs for banks have caused much resentment among the public. First, there has been a reduction in the number of free transactions a month at any non-home bank ATM from five to three.

The change will be effective from November in Mumbai, Delhi, Kolkata, Chennai, Bangalore and Hyderabad. And second, banks’ freedom to charge their customers for more than five transactions at their own ATMs. We spoke to people across the country to get their views.

While we expected a backlash, our interviewees surprised us with their innovative ideas to work around the rules and came up with sensible solutions for banks to reduce costs.

Priyanka Sahay, a young journalist from Delhi feels that these changes will force people to withdraw bigger sums to keep the number of withdrawals within the limit prescribed. This will leave people with less cash in their bank accounts, which will mean a loss of interest, which they could have earned otherwise.

She cites the case of people in the lower income group who might be more affected by this move. “I can afford to withdraw more at one go to escape the charges, but what about the people who earn only a few thousand rupees a month? They would not want to pull out huge amounts as, instead of saving, they could end up spending the whole thing,” she says.

But Sahay has found ways to work around this inconvenience. Consider this: The RBI has given banks a freehand to charge for more than five transactions at home ATMs, if their profit-loss dynamics from the ATM operations warrant it. And, many people have a savings account in more than one bank.

So, Priyanka, who holds savings accounts at SBI and ICICI Bank says she will find out which of these two banks will be more benevolent and not charge her for more than five transactions from home bank ATMs.

She plans to then either move entirely to that bank or at least move sums required for her regular expenses there so that she can withdraw in small amounts frequently.

Priyanka also has a valid point when she says that white-label ATMs could be a solution if banks think that setting up their own ATMs and paying an interchange fee every time their customers use another bank’s ATM is pinching their pockets.

White-label ATMs are owned and operated by companies/service providers and can be subscribed to by banks. Banks, on their part, will have to pay only the interchange fee to the service provider. This way, they can cut on costs incurred in setting up the ATM, maintaining or servicing it periodically and paying rent for the hired premises. Lower costs, in turn, could mean that customers could make a higher number of free transactions or can pay much lower charges if they exceed the prescribed number of transactions a month.

But while the wide distribution network of the companies which set up white-label ATMs will keep them easily accessible, the story will be better for the customer only when more banks subscribe to a white-label ATM, Priyanka cautions.

The reduction in free transactions at non-home banks from five to three will hurt, feels 32-year-old Vivek Upadhyay, who works with the Corporate Strategy team at Ashok Leyland in Chennai. Vivek has accounts at SBI and ICICI Bank, but finds it convenient to use the IndusInd Bank ATM in his office premises.

After the new rules are implemented, Vivek intends to stay within free withdrawal limits and manage monthly expenses using cash in hand and credit/debit cards. But he feels that cash management arising from more cash at hand will be a challenge.

“But well, we used to do that few years back when ATMs were not that widely available,” he says. Though for him, the extra charges may not hurt much, he is against shifting the burden to customers. “It is not about how much more or less banks charge per transaction, I believe it is an unfair charge on customers. If all transactions subsequently become charged, I don’t mind going to the bank branch once a month to do a withdrawal,” he says. Like Priyanka, Vivek also comes up with easy solutions for banks to reduce their costs. “To bring costs down, banks can easily share ATMs,” he says.

“Isn’t this something that telecom companies have done with mobile phone towers quite successfully? Imagine how counterproductive it will be if we had as many towers as the number of telecom companies for every group of four residential colonies, and this pattern gets replicated pan India!” he quips.

With banks worrying about additional costs for deploying security personnel after an ATM user was attacked in Bangalore a few months ago, Vivek also has ideas on reducing security-related costs by using technology.

While it may involve a one-time cost, intelligent location of CCTV cameras and continuous monitoring of footage can help reduce the recurring expenses of deploying security personnel, he says.

Vivek also suggests that ATM machines could be designed in such a way that would make removing cash forcibly impossible. ATMs could also have panic switches and alarms which can alert the bank, police or a response team.

Senior citizens are equally vociferous in questioning the RBI’s move.

Though the charges are proposed to be introduced in the metros first, Rameshwar Pattanayak from Balipadar PO in Odisha’s Ganjam District, is concerned. What if banks eventually extend this move to ATM users all over the country? This senior citizen talks about the problems he will face.

He says he will use the ATM fewer times and withdraw bigger sums. But what if the ATM doesn’t have enough cash to dispense if everyone decides to do what he does, he asks.

Before imposing the charges, banks should pay attention to periodic refilling of cash, he says, as this is a problem in semi-urban and rural areas such as his. He also wonders what would happen if a transaction is not completed due to technical faults and we are forced to use the ATM again. The no-show could also be counted as one transaction.

HK Arora, a retired MTNL employee from Delhi, says: “ATMs were originally envisaged to help banks reduce crowds and costs of operation at their branches. So ATM transaction limit should continue to be as it is now. Else, the crowds at the banks will increase.”

He says if this move is implemented, operational costs of bank branches may go up even as ATM-related costs come down. His suggestion is that instead of charging customers citing high costs, banks can restrict to installing ATMs at their branches alone.

Given the wide branch network, availability/accessibility will still be easy if this model is followed. At the same time, fixed costs such as rent and security can be shared.