The era of free ATM usage will come to an end on Thursday, October 15. Every transaction carried out on another bank’s ATM could cost an account holder as much as Rs 20 and withdrawals will face a limit of Rs 10,000, the Indian Bank’s Association has said in its guidelines.

According to the guidelines, banks can offer savings-account holders five free third-party withdrawals every month — they can be charged from the sixth transaction onwards. Current account holders can be charged the fees, which ranges from Rs 18 to Rs 20, from the very first transaction.

Most banks are convinced that charging current account and no-frill account customers from the word go is a good idea. It suggests that the usage of ATMs by current-account holders is price-insensitive. For others, banks have decided to frame their charges depending on the profile of the customer. For instance, HDFC Bank is allowing its salary account and premium customers an unlimited number of free third-party ATM withdrawals, while restricting savings-account holders to five free withdrawals. HSBC is also waiving ATM charges for its Premier and PowerVantage customers.

“This is likely to be the trend in the industry and I expect most banks to follow suit. Remunerative accounts will not be charged, whereas no-frills and zero-balance accounts will be charged,” said a senior executive of a private sector bank.

Axis Bank, which has the third largest ATM network in the country, has chosen to break ranks and not charge any customer for third-party withdrawals. Informed sources said this is a part of the bank’s strategy to attract low-cost current account and savings account (CASA) customers. The bank was seeing positive interchange flows even when the free ATM rule was in place and is thus in a position to offer this facility to its customers.

Customers have been enjoying the flexibility of withdrawing cash from any banks’ ATM free of charge since April 1, 2009 when a Reserve Bank of India (RBI) directive to that effect came into force. However, banks complained that the number of transactions had increased dramatically since then, while the ticket size of each withdrawal had reduced, resulting in increased interchange expenses for banks. Every time a customer uses another bank’s ATM, the customer’s bank has to pay the acquiring bank an interchange fee of Rs 18 to 20. There could be a reversal of sorts in this trend once the new regime falls into place on Thursday.

Banks were required to inform customers about the charges one month in advance. Most banks said they have been doing so through quarterly statements and advertisements at ATMs and branches.

source: business standard

Tags: atm charges

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