From 1 April, people will be able to use the automated teller machine (ATM) of any bank to withdraw cash or check their bank balance, at no extra charge. This is thanks to new Reserve Bank of India guidelines allowing free access to ATMs.
Earlier it was feared that the move may prompt banks to go slow on ATM expansion, in view of the fee from customers disappearing. But as Moneycontrol reports, this does not seem to be the case, as most banks plan to continue with their ATM expansion.
This is because the interchange fee, which is paid between banks, will continue to exist. So the RBI move could prove to be advantageous for banks with large ATM networks. They could earn more fee income as customers of other banks would access their ATMs. The interchange fee is between Rs 15 and 20 per transaction.
Sanjeev Patel, head, direct banking channels, HDFC Bank, said his bank, which has about 3,500 ATMs, is not planning to go slow on ATM expansion. ''We are a big acquirer. We have a large distribution network and this will benefit us. It is unlikely that my customer will move out. Other banks' customers will come to us,'' he said.
Hemant Kaul, executive director retail banking, Axis Bank, said that the beneficiaries of the RBI guidelines would be large banks who have invested money in setting up their own ATMs. The number of ATM transactions per debit card would also register an increase, he added.
Axis Bank, which added close to 400 ATMs this quarter, will have a network of around 3,600 by this fiscal. For both HDFC Bank and Axis Bank, around 15 per cent of ATM transactions are from customers of other banks.
Banks could see some downward pressure on the network charge due to the disappearance of the Rs20 fee charged from customers of other banks using their network. But as the interchange fee will continue, a small bank with a smaller ATM network will see more adverse impact.
''Banks that tried to save capital cost by going slow on their ATM expansion would now have to pay for it, as henceforth customers would not think twice before using another bank's ATM and their banks would have to pay for it,'' said a banking analyst.
Union Bank of India is one of the few banks that already allow its customers to use ATMs of other banks free of cost. The bank will continue with its own ATM expansion, said M V Nair, chairman and managing director. The bank opened 500 branches and set up 500 ATMs this year. It has set the same target for next year as well.
According to Nair, the decision to expand ATMs will depend on the individual bank. But the RBI move could also give rise to alternative methods of proliferation of ATMs. ''I see the distinct possibility of 'white labelled' ATMs, which are present worldwide, catching on in India. The Payment Corporation of India could be the right vehicle to implement this,'' he said.
YES Bank also offers its customers free access to ATMs of other banks. The bank had offered the service from its inception four years back, as it wanted to develop its retail customer base, according to Suresh Sethi, president - transaction banking group.
''We don't see any change in our core banking operations as our customers already enjoy free ATM use. ATM expansion is critical to improving the visibility of the bank and building its image. Our expansion strategy will be guided by that,'' he said.