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India's Reserve Bank agrees to allow P2P transfer at ATMs

September 23, 2003

BANGALORE, India - The Reserve Bank of India (RBI) has decided to allow banks to introduce funds transfer from one customer's account to another customer's account of the same bank through ATMs.

According to a report in the Business Standard, the decision will bring down the cost of transactions for banks while increasing customer convenience. The banks will need to modify their ATM software to be able to launch the functionality.

The mandate and related documentation, which form the basis for effecting payments for such transactions carried out over the ATMs, is to be settled bilaterally by banks with their customers. The rights and obligations of each party should be clearly stated in the mandate and should be valid in a court of law, the RBI said.

"As transfer of funds is restricted to customers of the same bank, there is no settlement risk involved. Further, it's a zero-sum game as far as the deposit base of the bank is concerned. One customer's account is debited and another's credited at the same time. In this case, the ATM will function more as a computer for communicating with the bank," said a senior banker in the Business Standard report.