Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
10,741.35-177.35
Stock Analysis, IPO, Mutual Funds, Bonds & More

Inter-bank ATM transaction charge set to fall

Banks will find it cheaper to allow their customers to withdraw cash from automated teller machines (ATMs) of other banks, with the Reserve Bank of India’s (RBI) technology arm waiving its Rs 2 transaction charge for ATM interchange.

TNN|
Dec 06, 2007, 12.33 AM IST
0Comments
MUMBAI: Banks will find it cheaper to allow their customers to withdraw cash from automated teller machines (ATMs) of other banks, with the Reserve Bank of India’s (RBI) technology arm waiving its Rs 2 transaction charge for ATM interchange.

The Institute for Development and research in Banking Technology (IDRBT), an RBI subsidiary said that it has decided to waive the Rs 2 -per-transaction fee it has been charging banks for switching its transactions. However, the transaction charges that banks pay each other for the use of ATMs will continue. Most banks pass on both the inter-bank charge and IDRBT’s fees to customers.

However, some new private banks and foreign banks absorb the cost in order to make the transaction free for large customers.

IDRBT, through its NFS network, has been providing banks a cheap alternative to other shared payment networks. The fee waiver, according to IDRBT, is an attempt to encourage all banks to join the NFS network to widen the national network of ATMs. The institute, which was set up by RBI in 1996, also feels that the waiver will open up an opportunity for banks to reduce costs by routing inter-bank ATM transactions through the NFS. The switch can also act as an aggregator of transactions for the bank, IDRBT added.

The move has been welcomed by bankers across the board. “It’s a good move by the authority, if the benefits of the waiver are passed on to customers,” felt Axis Bank vice-president for alternate channels Aspy Engineer
“However, if the fund created by this fee could have been used for promotion of customer awareness on safety and education of alternate banking methods, it would have really helped,” he added.

The main beneficiaries of this move will be smaller banks, which do not have as robust an ATM-network as their counterparts. “It’s a critical move for the cause of promotion of alternate channels of banking, it will encourage our customers to form a habit of using ATMs,” said Centurion Bank of Punjab head of retail banking Vivek Wig. He added that his bank has been allowing certain customers to use ATMs of any bank, and this would now be an easier proposition.

The NFS was set up in 2004, and comprises of 27 banks, including ICICI Bank, HDFC Bank, Axis Bank, Bank of Baroda and Punjab National Bank. It covers 16,891 ATMs at present. The switch aims to integrate ATM switches of all the banks in the country, and simplify inter-bank transactions. It picks up transactions from the banks’ respective switches and not particular ATMs.

So, it is equidistant from competing banks and networks. However, the NFS still does not include State Bank of India and its subsidiaries, which have the largest ATM-network in the country. ATMs have become the preferred mode of transaction, with almost 70% of all banking transactions taking place on the ATM channel.

Most banks have been setting aside a significant investment for setting up more and more ATMs, and if such a switching system comes in place, IDRBT hopes that ATMs can be used as ‘shared infrastructure of all banks’.
0Comments
Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service