Topic of the Week-All ATM Transactions Pan-India to be free from April 1st, 2009

All ATM Transactions Pan-India to be free from April 1^st, 2009

A revolution in ePayments is waiting to be unleashed from April 1^st, 2009

Come April 1 and you need not have to sweat it out looking for an ATM of your own bank as you can use ATMs of your choice without shelling out any extra money.

Thanks to an RBI directive, much to the relief of common man, banks have been prevented from charging any fee for cash withdrawals using ATM and debit cards issued by other banks from April 1 onwards.

The relevant circular of Reserve Bank of India, is accessible at

http://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=4076

However, banks can still charge extra for services like cash withdrawal with the use of credit cards and at ATMs located outside India.

As the services will be free, customers will be tempted to make more small value transactions, rather than big-value transactions.

For Banks with a smaller ATM Network, this will directly impact their bottom-line, as the Interconnect Charges might be increased by Banks with a huge ATM Network.

Interconnect Charges are charges levied by banks when ATM Cards of other Banks are used on their network.

As the free services, will affect the bank’s bottom line, one way of shoring up revenue, will be the increase in Annual Maintenance Charge, levied on ATM cum Debit Cards.

The other way for Banks to minimize the outflow, due to interconnect charges, is to encourage customers to make use of the Debit Swipe facility, rather the cash withdrawal facility.

60% of the cash drawn from ATM’s, is used to transact at locations where Debit Card Swipe facility is obtainable. A 20% shift also, will benefit the banks. Maybe Banks, can think of a Reward Point Scheme, if the Debit Swipe facility, is preferred over Cash Withdrawal Facility.

However, it is yet to be seen, as to how Banks will respond to this free service.