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After 6 months, India's ATM withdrawal limits show mixed results

The central bank seems to have been correct in saying that the new regs would not adversely affect banks ... but the story could be different for consumers.

July 20, 2015

Last November, the Reserve Bank of India announced new regulations limiting the number of free foreign ATM transactions bank customers could make monthly. In metro areas, the number was three, outside of major cities where home bank ATM access could be an issue, the limit was 5 transactions.

RBI reasoned that unlimited free transactions were encouraging citizens to depend too much on cash rather than electronic payment options, but FIs reasoned that ATM users would simply make larger withdrawals, draining banks of cash.

A recent article by livemint.com asserts that FIs' fears were misplaced. After six months, data showed that after a dip in ATM use when the rules kicked in in November, ATM use quickly returned to normal — in terms of both volume and value of transactions.

However, that's not the whole story. The data also seem to be proving out the prediction by some that the new regulations would make banks reluctant to add new ATM locations.

Prior to November 2014, the pace of growth in bank-owned ATMs had slowed somewhat. However, since March, growth dropped almost to nil.