Big Banks Plan 90% Cut in Fees for Mi­cro ATMs

Move to cut in­ter­change fees will make busi­ness un­vi­able for in­sti­tu­tions that have taken bank­ing to vil­lages thereby rendering a big blow to smaller bank­ing units

The Economic Times - - Finance & Commodities - Pratik.Bhakta @times­group.com

Mum­bai: Big banks are closing ranks to pre­vent loss of mar­ket share to nim­bler and smaller ri­vals in the hin­ter­land by propos­ing a dras­tic cut in in­ter­change fees on trans­ac­tions in mi­cro ATMs, po­ten­tially thwart­ing the gov­ern­ment’s ef­forts to push for dig­i­tal and elec­tronic pay­ments in ru­ral In­dia, said two peo­ple fa­mil­iar with the mat­ter.

In­dian Banks’ As­so­ci­a­tion, the rep­re­sen­ta­tive group for banks, has sug­gested a 90% re­duc­tion in in­ter­change fees for trans­ac­tions done on mi­cro ATMs, mak­ing the busi­ness un­vi­able for in­sti­tu­tions which have taken bank­ing to even re­mote vil­lages with the help of tech­nol­ogy rather than build­ing brick-and­mor­tar branches. In­ter­change is the fee paid by the bank whose cus­tomer is us­ing the mi­cro ATM of the one who has in­stalled the ma­chine. “The IBA has de­cided to re­duce the in­ter­change on trans­ac­tions done through mi­cro ATMs to 0.1% of the trans­ac­tion amount from around 1% now,” said a se-

nior banker who was part of the de­lib­er­a­tions, but did not wish to be iden­ti­fied as he was not au­tho­rized to talk to the me­dia. “For trans­ac­tions up to .₹ 1,000, it has been fixed at .₹ 1, for that up to .₹ 2,000, it is .₹ 2, and so on .₹ 10 for .₹ 10,000. ” This has caused con­sid­er­able an­guish among smaller banks, pay­ments banks and small fi­nance banks which are look­ing at Aad­haar-en­abled pay­ments as a ma­jor means of cus­tomer ac­qui­si­tion and busi­ness ex­pan­sion in ru­ral In­dia where the big banks have failed to reach de­spite years of reg­u­la­tor and gov­ern­ment prod­ding.

“Such a dras­tic slash­ing of fees will end up de­stroy­ing the busi­ness model of mi­cro ATMs which oth­er­wise has the po­ten­tial to take fi­nan­cial ser­vices to far flung ar­eas and pro­mote dig­i­tal bank­ing,” said the per­son quoted above. While an ATM only al­lows cash with­drawals, mi­cro ATMs are not only used for with­draw­ing cash, but also al­low bank cus­tomers to open ac­counts through Aad­haar ver­i­fi­ca­tion, make pay­ments and un­der­take a host of other ac­tiv­i­ties. At present, mi­cro ATMs have an in­ter­change fee of 1% with a min­i­mum of .₹ 5 and a max­i­mum of .₹ 15, which is the flat rate charged for in­ter­change on stan­dard ATMs.

“If th­ese rates get op­er­a­tional, in­ter­op­er­a­ble trans­ac­tions will end up caus­ing loss to our busi­ness,” said a pay­ments com­pany ex­ec­u­tive who also de­ploys mi­cro ATMs.

A se­nior IBA of­fi­cial, on the con­di­tion of anonymity, said that banks have taken this call to ad­dress is­sues around very small value trans­ac­tions be­ing done through the Aad­haar net­work at PDS (Pub­lic Dis­tri­bu­tion Sys­tem) shops.

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