News

Indian banks pushed to reduce debit fees

March 27, 2012

U.S. ATM operators have company: The Reserve Bank of India is pressuring banks in that country to lower fees on debit card transactions, according to a news report at businessstandard.com. Currently, banks charge 1.1 percent on credit transactions and 1.2 percent on debit transactions.

The RBI said that the higher charge for debit cards doesn't make sense. “We are saying that the debit card interchange fee should be lower because credit cards get paid after some time, whereas in debit cards, there is an instantaneous debit into my account. Hence, logically debit cards charges should be lower,” said G Padmanabhan, the RBI executive director in charge of the payments and settlement system.

Padmanabhan said that the RBI allows the market to fix its own price until such time as the pricing becomes illogical, which would seem to indicate that the organization is preparing to step in with its own fixed price.

Indian banks have issued more than 268 million debit cards, according to RBI data. Padmanabhan said that unbanked and underbanked areas present great opportunities for banks to increase their cardholder numbers if only they will make bank accounts more accessible. “Why can’t banks issue debit cards to no-frills account-holders as one can withdraw only up to the amount in his account,” he said.

For those in rural areas who did hold bankcards, Padmanabhad said it was incumbent on banks to make sure ATMs were available and stocked with money. Customers face enormous problems in accessing ATMs in interior parts of the country, he said.

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