Recommendations given by RBI committee to boost the number of operational ATMs in the country

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The committee of Reserve Bank of India (RBI) on ATM fees has recommended charging customers for every withdrawal above ₹5,000, according to a copy of an unreleased report obtained through the Right to Information (RTI) query. The report of the committee led by the chief executive of the Indian Banks Association, V G Kannan said that in order to discourage high cash withdrawals from ATMs, only cash withdrawal transactions up to (and including) ₹5,000 to be considered for free transactions. Banks may impose charges on the customer for every individual transaction above ₹5,000. This report was submitted to RBI on 22 October 2019 but never released.

When Srikanth L had asked for the report under RTI, the Public Information Officer (PIO) had rejected the request and said it was held by RBI in a fiduciary capacity and was exempt under Section 8 (1) (e) of the RTI Act. The report was made available only after an appeal against the RBI response. The court declared that fiduciary capacity does not arise in this case. The first appellate authority agreed with the appeal that this is a committee report and the same has to be made public, as with other committee reports of RBI. As per this report, the operating cost of ATMs has risen whereas the interchange fees and the cap on customer ATM usage charges have not been revised since 2012 and 2008, respectively. The committee also expressed their concern about the lack of new ATM installations, especially in semi-urban and rural areas.

The committee in their report had recommended using the population as a metric for calculating ATM charges. For instance, it suggested the increase in free transactions at ATMs in all areas with a population of less than 1 million (as per census 2011 and to be reviewed from time to time) to six per month, from five per month at present. For areas with a higher population, it recommended keeping the free transaction limit at three. As per the report, the committee was in favor of increasing the upper limit of customer charges by 20 percent to ₹24 plus taxes, per transaction after the free usage limit expires.

The report said regarding the interchange front that, for ATMs in all areas with a population of 1 million and above the interchange should be increased by ₹2 to ₹17 for financial transactions and to ₹7 for non-financial transactions. Regarding areas with a population of less than 1 million, the charges were recommended to be hiked by ₹3 in both kinds of transactions to increase greater penetration of ATMs. The committee noted that the most important details regarding the ATM system in India are that, usage of ATMs by the public has been growing significantly. But from the last three years, new ATM deployments have been stagnant due to the increasing cost of operating ATMs and since there have been no changes in ATM usage charges and interchange fees, new deployments were not feasible.

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