Private ATMs - Great News for Travellers in India

The title might seem not-so-relevant to a Banking & Finance Blog like mine. Isn’t it? But, as with many topics covered in this blog, this one too is related to the Indian banking industry.

Have you ever gone on a trip to any rural or semi-urban area of India? During such a trip, have you ever faced the difficulty of not being able to find an ATM to withdraw cash? I have been in such situations multiple times and most probably you would have too. This post is about some good news about this situation…

Why can’t we find ATMs in Rural Areas?

Operating an ATM involves a lot of money. You need some space to set up the machine, a security guard to safeguard the machine, electricity, computer networking etc. Banks accept this cost of setting up ATMs in cities and posh areas because, the number of customers who use an ATM in a city area is high and adds a lot of business value to the bank. But, if the same is the case with an ATM in a rural area, it is not cost effective for banks. That is why you cant find many bank ATMs in rural areas.

An Interesting Stat: There are nearly 90,000 ATMs in India. Of which approximately 80% or more are in Cities and Urban Areas.

So, what is this Good News?

The Good News is:

The Reserve Bank of India has allowed non-banking entities to own and operate ATMs across India.

Yes, if you want, you can purchase 10 ATM’s and install them in rural areas in your locality. That’s great news, isn’t it?

How will these ATMs work?

These ATMs will not be owned by any bank. Any bank ATM Card that is tagged to a service like VISA or MasterCard or any other service will be able to use the ATM and withdraw cash. These ATMs will be linked to all banks in India and will be able to service cash withdrawal requests of all customers irrespective of what bank they have an account with.

Why would someone want to set up an ATM Machine?

This will be a business opportunity for the individuals/corporations setting up those machines. The RBI has given permission to those entities that set up these private ATM Machines to charge for their service. So, anyone who uses the ATM Machine to withdraw cash will have to pay a fee that will go against the service which will be the profit for the company setting up those ATMs.

What are the Restrictions in Using these ATMs?

There are a few restrictions that need to be remembered before using such ATMs. They are:

1. Every transaction in such “Neutral” ATM is charged. The fee is payable by the customer to the owners of that ATM
2. This usage does not come under the “5 transactions in other bank ATMs” ruling of RBI. Your bank too may charge you for using the Neutral ATM

But, if you think about the situation, you are stuck in a rural area and need some cash, would you think paying lets say 100 or 200 rupees to withdraw cash as more important than getting the cash to meet your family’s cash requirements?

Who can Apply to Set Up these ATMs?

Any non-banking entity that wants to set up these ATMs must have a minimum net worth of Rs. 100 crores at the time of application. Also, they must maintain their net worth throughout their operation. This is one of the pre-requisites to receive the approval from RBI.

Will this be a Successful Idea?

I have seen such Private ATMs in USA and other developed Nations. They are very successful and are even set up in urban and city areas. However, this is a novel idea for a country like India. Only time will tell if this will be successful, but I think this will be a successful business idea because:

1. ATM Penetration in rural and semi-urban areas of India is very poor. Chances of us finding an ATM in such areas is very slim. So, if private non-banking entities set up an ATM Network, it will be very useful for customers
2. Though these private non-banking entities may charge you a fee for providing the service, once competition heats up among private players in setting up these networks, the fees may come down and become cheaper

All in all, this is a very good development and hopefully it will be Successful!!!

Good News & Bad News for ATM Users

The title of this article kind of instills some curiosity into your mind. Doesn't it? The government has of late taken a lot of decisions reg. banks and finances in India. Some were good while many were bad news for us, the General Public. The latest in this series is the news related to usage of Bank ATMs. This news is both good and bad. Read on to find out what exactly the news is.

Before we Begin:

All the good & bad news mentioned in this article are in effect immediately starting 1st Junly 2011 (Today). So make sure you make a note of the same.

The Bad News Part:

The number of free transactions allowed at ATMs of banks other than where a customer holds the account would now also comprise non-financial transactions like balance inquiry.

Currently, customers are allowed a limited number of free transactions, generally five, for cash withdrawal and other financial transactions from other bank ATMs, while there is no cap on number of free non-financial transactions like balance inquiry or mini statement.

All this is set to change. RBI has now allowed the number of free transactions permitted per month at other bank ATMs to be inclusive of all types of transactions, financial or non-financial.

To add to the bad news, these free transactions would be available to only the savings bank account holders. So current account holders cannot withdraw cash free of charge in other bank ATMs.

Why is this Bad?

Well, this is bad because we have to go in search of our own bank ATMs if we need to withdraw money or check our balance if we have exhausted our quota of 5 free transactions per month. But, if you are someone who is willing to pay a small fee (like Rs. 20 for withdrawal and Rs. 10 for balance inquiry) then this news of no relevance or impact to you.

Note however that the numbers I have mentioned are just an example and you have to check with your own bank to find out the exact charges for using other bank ATMs.

Now for the Good News Part

As per an RBI directive, banks will have to credit the wrongly debited amount to the customer's account due to failed ATM transactions within seven days of the complaint, as against the current norm of 12 days.

Why is this Good?

If you are someone who uses the ATM frequently, you might have encountered the situation wherein, your account got debited of the amount you tried to withdraw but the machine never gave you any cash. In such a situation, you have to call up customer care and have them revert the transaction. The banks took their own sweet time to credit the money into our account. Though the RBI guideline was 12 days, the banks usually took even longer to return the funds into our account.

The RBI also states that, the banks would have to pay Rs. 100 per day beyond 7 working days, but only if the complaint is lodged within 30 days of the date of the transaction.

What should we do now?

Realistically speaking, lets hope that our ATM transactions are successful and we don't have to go through the trauma of calling up customer care and chasing them. Nonetheless, if the situation does arise, we must ensure that we raise the complaint to the bank within 30 days of the date of transaction in the ATM Machine.

Some More Good News:

In another measure to check any fraudulent use of bank accounts, the banks have also been told by RBI to provide SMS and email alerts to the customers for every transaction done on the bank account from tomorrow, as against the current practice of alerts for only select transactions beyond a certain amount or weekly/monthly alerts.

Why is this Good?

If banks provide us with updates every time there is a transaction on our account, we will be able to keep track of the funds in our account and identify/spot fraudulent transactions immediately. So, it is our responsibility to be vigilant and read all such alerts from our banks properly.

Happy Banking Folks!!