ATM PENETRATION TO RISE AS RBI PERMITS HIGHER INTERCHANGE FEE
Penetration of automated teller machines (ATMS) is expected to rise, following a central bank decision to hike the interchange fees on cash withdrawals and non-cash transactions.
Experts believe this will incentivise banks and white label ATM deployers to set up more cash dispensers, especially benefitting the rural areas. Last revised in 2012, ATM interchange has remained at ₹15 for financial and ₹5 for non-financial transactions, despite several representations from the industry. On Thursday, the Reserve Bank of India (RBI) allowed hiking the fee to ₹17 for financial transactions, and ₹6 for non-financial transactions.
White label ATMS are set up, owned and operated by nonbanks. There are four such operators in India, as per the RBI data.
ATM interchange is the charge paid by the bank that issues the card to the bank where it is used to withdraw cash. While the card-issuing bank is called the issuer, the latter is called an acquirer. This charge is divided between the acquirer and the company maintaining the ATM, which is why banks discourage customers from using ATMS of other banks.
There were 213,575 bank ATMS in March 2021, a modest increase of 1.3% from March 2020, showed data from the RBI. That apart, the number of white label ATMS stood at 25,013. India’s rural areas account for 20% of all ATMS in the country.
“I think as the interchange increases, private ATM deployers as well as banks will get a good boost and significant penetration of ATM services will happen in India’s unbanked regions,” said Navroze Dastur, managing director at Atmmaker NCR India.
Dastur added that a lot of banks are not deploying ATMS in smaller towns and rural areas because it does not make commercial sense.
India had 20.95 ATMS per 100,000 adults as of 2019, lower than several other nations around the world, according to the World Bank.