Banks demand higher ATM fees to cover security costs

Bank customers may soon have to shell out a fee for using the ATMs of even their own banks, if the Reserve Bank of India accepts the recommendations of the Indian Banks Association (IBA).

The umbrella body of lenders has proposed the move in order to cover the cost of added security at ATM kiosks mandated by the union government. According to the IBA, banks will incur a collective cost of Rs4,000 crore a month due to the government order of guards and CCTVs at every ATM outlet, and this can hardly be done without raising user charges.

Addressing newspersons in Mumbai today, IBA's chief executive officer M V Tanksale said the increase will not affect most account holders since it allows more than one free transaction per week; and "For balance enquiry, SMS is a much more convenient option."

The demand by the centre as well as state governments for increased security at ATMs is the direct fallout of the brutal attack of a woman employee of the Corporation Bank in Bangalore inside an ATM kiosk by a man armed with a 'chopper' in November last year. The entire incident was captured on CCTV, but the assailant is yet to be traced.

Tanksale meanwhile also said that reducing the number of free transactions would ensure that the ATM network is not overloaded – a rather ambivalent argument, since banks themselves are encouraging the use of ATMs to reduce pressure on their branch staff.

According to Tanksale, the ATM network of banks is currently around 1.4 lakh and is expected to increase to around 2 lakh in six months. "The viability of this network depends on the migration of transactions from branches to ATMs," he said – but added that given the size of the network, any increase in maintenance costs would translate into an annual increase in cost of thousands of crores of rupees for the banking system as a whole.

Underlining the point, Tanksale said that banks have already resorted to restricting ATM use in various ways, like shutting them down during odd hours.

The IBA has also supported an increase in charges that banks pay each other when their customers use third-party ATMs from Rs15 to Rs18. At present, most banks do not charge account holders if they use the bank's own ATMs. In addition, RBI norms require every bank to allow its customers access to third-party ATMs five times a month without any charge, subject to a maximum withdrawal of Rs10,000.

Some banks provide their customers more than the mandated number of free transactions, but this varies from bank to bank.