Small banks witness increase in transactions after open ATM rule

Since the launch of free cash withdrawal facility from automated teller machines (ATMs) the small banks are getting large number of customers of larger banks. Previously the banks were charging customers for cash withdrawals and balance enquiry at third-party ATM but from April 1 as per RBI norms the charges cannot be passed on to the customers.

Now the customers are using small banks ATM located near to their place due to which the big banks such as ICICI bank and SBI paying more interchange fee to other banks for using their ATMs.

Therefore big banks such as ICICI Bank country’s largest private sector player is paying a monthly outgo of Rs 4-5 crore as the payment of interchange fee to other banks. Even the State Bank of India (SBI) country’s largest public sector bank is getting equal number of other banks’ customers using its ATMs as the number of its customers using other banks’ machines. R P Sinha the deputy managing director for information technology said, “The total number of transactions at our ATMs have gone up by more than 100 per cent since April 1. However, our customers are also using other ATMs, depending on convenience”.

The banks have to pay interchange fee of Rs 18-20 per transaction when a banks’ customer uses the ATM of another bank.

On the other hand the number of customers has increased in case of smaller players. Dhanalakshmi Bank sources have informed there has been increase in transactions by 50%, is largely of the customers from other banks.

According to bank’s Managing Director and CEO Amitabh Chaturvedi, “Often, ATMs of large banks have long queues outside them and if our ATM is just next door, there is a spillover into our ATMs”.

YES Bank a new generation bank is having 216 ATMs, has not witnessed much increase but its country-head for cash management and direct banking pointed out there has been a major increase in the number of transactions and positive inflows from interchange fees. T S Jagadeesan, General Manager, Planning informed, “We had apprehensions about the (free ATM use) rule, since we have a significant number of no-frills account-holders, who have no minimum balance requirement. However, so far we have seen positive interchange flows”.

While the big banks having large networks of ATM such as Axis Bank are getting positive cash flow from the ATM. Aspy Engineer, Senior Vice-President of Alternate Channels pointed out, “Since April, both the number of interchange transactions we have acquired and cases where our customers have gone to other ATMs have gone up by 100 per cent. However, we were a net acquirer even before the rule came into force and so are interchange revenue flows are positive”.