News

ATM fees in India could be dropping soon

July 30, 2012

If the Indian finance ministry gets its way, Indian ATM-users will soon be paying less for their transactions.

Customers are now able to make five withdrawals per month at other private sector banks at no cost. A sixth transaction costs 18 rupees (32 cents), said an article at Live Mint. For balance inquiries, the fee is 5 rupees (9 cents). The Indian Finance Ministry wants to see these charges capped at 10 rupees (18 cents) and 5 rupees (9 cents), respectively.

The ministry believes that a fee reduction is in order because of a new program that will cooperatively procure ATMs for private sector banks. In this arrangement, the most prominent bank in an area procures ATMs for all banks in that area, ostensibly bringing down costs through economies of scale. The savings should enable banks to lower their fees, the ministry reasoned.

However, fees are set between the National Payments Corp. of India and the central bank, RBI, and the finance ministry has no power to impose limits. In a July 26 meeting, the RBI and NPCI agreed to an initial reduction to 15 rupees for sixth withdrawals and 5 rupees for sixth balance inquiries, Live Mint reported. Any additional reductions would be introduced gradually, the two organizations said.

But according to one public sector banker interviewed by Live Mint, the procurement program would bring down private sector banks' average cost per offsite transaction to 8 rupees (14 cents), and for an onsite ATM, to 6 rupees (11 cents).

"Then why do banks need to charge third-party transaction fees in double digits when costs are going to come down in the near future?" he said.

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