Mumbai: India’s ATM operators’ association has written to the Reserve Bank of India (RBI) seeking a hike in the interchange fee paid by customers on cash withdrawals, saying their businesses will “bleed.” This could significantly impact the rollout of new ATMs in a country already battling low teller machine penetration.
The contention of these operators is that the RBI’s increased compliance standards on security and maintenance have increased the cost of running the teller machines without a corresponding increase in the revenues these companies make through fees accrued.
The current interchange fee has been set by RBI at Rs 15 per transaction with a cap of five free transactions per customer, which the Confederation of ATM industry, or CATMi, feels is not enough for sustenance of daily operations.
“The continued bleeding is not only impacting the viability of ATM businesses but has significantly slowed down new rollouts both by banks and white label ATM operators,” said the February 13 letter addressed to a senior RBI executive.
“In the meanwhile, RBI has been relentless in demanding implementation of various compliance/control measures such as rollout of EMVs, etc, which is further impacting sustainability of industry players.”
A high-level committee set up by the RBI earlier in 2019 to recommend ways to increase ATM penetration in the country had submitted its findings to the central bank in December. The primary recommendation of the six-member committee was to hike the interchange fee, sources with direct knowledge of the matter told ET.
For urban areas where the population is more than 1 million, the ATM committee has recommended an interchange fee of Rs 17 on financial and Rs 7 on non-financial transactions. It has also suggested capping free ATM withdrawals to three. For rural and semi-urban areas where the population is less than 1 million, the committee has recommended an interchange fee of Rs 18 for financial and Rs 8 for non-financial transactions, while free transactions could be six.
The RBI committee was headed by Indian Banks’ Association chief VG Kannan and included NPCI chairman Dilip Asbe, two senior CATMi representatives, SBI chief general manager GK Nair and HDFC liabilities head G Sampath Kumar. Meanwhile, sources told ET that deliberation on the scope of implementation of these recommendations is yet to get underway at the central bank level even as the industry is widely expecting a positive follow up on the committee report.