Banking: ATMs - Restrictions on  free cash transaction

11 10 2015

I am surprised to know from a recent media report (http://indianexpress.com/article/cities/pune/limitation-on-atm-transaction-rbi-allows-release-of-some-documents-on-decision-making-process/) that "Now, only five transactions from the home bank are free in a month and only three transactions are free from a non-home bank. After that, fee of Rs 20 is levied for each ATM transaction." 

Aggrieved with this new rule, Deepak Sethi, Pune resident, approached the Reserve Bank of India under the Right To Information Act to know what led to the withdrawal of free ATM cash transactions facility to the bank customers in 2014. It is alleged that the RBI was forced to take this step after pressure from the Indian Bank Associations (IBA) at the instance of its member banks as they were making losses in ATM operations. 

The success of banking business hinges upon two basic but time-tested tenets: 

1. Bank should be able to bring more and more people to its fold. 
2. Bank should facilitate deposit and withdrawal of funds with as much ease as possible. 

Taking into consideration these basics of banking, the Section 5 (b) of the Banking Regulation Act, 1949 clearly lays down: "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise."

Leaving aside the convenience to customers, this issue is more important from the banks' point of view. If a bank does not encourage ATM transactions, it will have to go back to brick and mortar banking involving huge costs on staff and establishment. While other countries have installed Cash Machines for withdrawals free of charge at all public places, the RBI wants the Indian banks to go backward to primitive times. 

Hope wiser counsel will prevail and the customers will be allowed free use of ATMs for banking services including the cash withdrawals.