New ATM Rules on the Block

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7 April 2009

On April 1, India entered a new era in ATM banking. The Reserve Bank of India, central banking authority of India, brought about a proposal to allow the bank customers to withdraw money from ATMs of any other bank in India free of charge. Earlier, a fixed charge was levied on the customer by the banks for any cash withdrawals from their ATMs. The transaction fee was reduced to a maximum of Rs. 20 (around 50 cents) on March 31, 2008 and further made free of charge with effect from April 1, 2009. India has now joined countries like UK and France which doesn’t charge any usage fees on bank customers.

While this is a boon for customers, the banks will have to rethink their business strategies. Although the usage fees are not charged to the customer, the bank would extract the fees from the bank which maintains the account of the customer. This inter-change fee is not fixed and will be decided by mutual bilateral agreement between the banks. Thus, the strategies of banks would now revolve around these inter-change fee rates.

The strategy would vary depending on the size of the bank

  • The banks that would gain from this move are those with a large number of ATMs. As of December 31, 2008, State Bank group had the highest number of ATMs with 11,250 ATMs around the country, followed by ICICI bank at 4,600 ATMs and Axis Bank at 3,570 ATMs. According to initial reports, these banks are expecting a rise of 10-15% in inter-change transactions.
  • The banks with small number of ATMs will be rethinking their ATM expansion strategies. Setting up an ATM in India would cost about Rs. 6 lakhs and a maintenance cost of about Rs. 50,000 – Rs. 60000 per month. Hence, the smaller banks might be better off paying the inter-change fees than setting up and maintaining an ATM. However, initial reports suggest that there is no slowdown in the ATM expansion plans, as many banks expect an increased usage of ATMs and would want to capitalize on the trend.

Also, in addition to the banks making their moves, white-label ATMs are also being planned to be launched in India. The ATM market will be going through an interesting phase and it is worth a watch over the next few quarters.


  • A number of banks with small ATM networks had already developed offers that enable their customers to use other bank ATM's at reduced or no charge. Banks like Yes Bank with small branch and ATM networks will now find it a lot easier to attract retail customers who may have stayed away fearing access was an issue. The bigger banks like SBI and ICICI had always known that at some point or the other, inter change fee income was going to be a big revenue generator and formulated their plans business plans accordingly.

  • Hi - When can we expect the RBI to liberalize who can issue/manage ATM machines?


  • It's been 3 months since customers in India have had the benefit of charge free withdrawals from any bank's ATM. Most reports so far seem to indicate 2 trends: 1)Number of ATM withdrawal transactions and the amount withdrawn has seen an increase and 2)Many banks (including some with smaller ATM networks) are reporting a net positive interchange fee position.

    The trends are significant and can provide an opportunity for banks to seriously look at customer experience at their ATM's inorder to pull more customers in from all the competing ATM's around. I live in an area that has ATM's of 4 banks at close proximity. I now find that I tend to use the ATM of one specific bank more often simply because its got the best maintained premises, and more often than not, dispenses fresh notes. Perhaps in time, if the messaging in the ATM and the premises are interesting enough, I might even be tempted to try this bank out (even though I'm quite comfortable with my current banking arrangements).

    The crux is simply that banks now have a growing base of ATM users who will walk into their ATM premises - increased interchange fees and an opportuinity to make them their customers.

  • recently there was a news that one can transact only five times in a month in a different banks atm and Rs.20/- will be charged for every extra transactions whereas the balance inquiries are free no limit.
    where we are heading now is to the type of slavery british era or to the present independent era
    a system was created with a great exercise to free the citizens so that thay can transact or use there own money as thay like and from wherever thay are in the country with the help of an Indian atm machine.
    why such a sudden back jump. are we proving to the world about our inefficiency lack of commitment to our people than what else
    lets hope for better days from our rulers the so called reserve bank of India and who else

  • What is the rules & regulation for installing the ATM machine & providing the service in india by any bank

  • There should be an Insurance Policy for theft of coustmer amount from ATM machine so that coustmer may believe more.

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