At a time when cash withdrawal from the ATMs has become a painstaking affair for large part of customers in the country ever since the demonetisation exercise came to the fore in early November, a proposal to further limit the number of free withdrawals seems to be in the works.
As per a report in The Economic Times, bankers in their pre-budget consultations with the finance ministry has proposed to bring down the free cash withdrawals to just three per month as against the prevailing 8-10 transactions, including the bank where one has an account.
This, according to the bankers, could be one of the measures to promote digital payments, as less cash usage due to cap on free withdrawals would prompt customers to use their cards or execute app-based payment transactions.
"A proposal to bring down free ATM transactions to three per month has been discussed with the finance ministry, and this is one of the measures being considered to disincentivise use of cash," the report said quoting a senior banker.
Previously, higher number of free cash withdrawals from the ATMs were allowed because of the situation prevailing then, but things have changed dramatically in last few months, especially, when the government is keen to promote digital payments technology and reduce cash usage in the system.
As of now, several banks in the country allow their customers five free ATM transactions in a month, after which the bank charges Rs 20 plus service tax on every transaction thereafter. For customers of other banks, three free transactions are allowed in six metros, while five free transactions in other cities, the ET report said.
For banks, another reason for recommending free cash withdrawal limit has been the falling ATM transactions since the note bank exercise in November. Because of prevailing cash shortage in the system, ATM transactions have dropped around 10-20 percent, raising concerns of a cost escalation for their ATM business.
In case the situation deteriorated further going ahead, banks were looking at raising transaction charges at ATMs to recover cost, but were also mindfull of the government's intention to reduce cost for customers, and hence raising charges was not possible for them, the ET report added.
In fact, the government is of the view that by 2020, all debit cards, credit cards, ATM machines and POS machines would become redundant in the country and customers will do their transaction through his thumb.
The fresh proposal to restric free cash withdrawal comes a day after the government increased withdrawal limit from the ATMs to Rs 10,000 from Rs 4,500.
It would be interesting to see whether the government in its zest to make digital payments a major success story will cut free ATM withdrawals in this budget.
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Published Date: Jan 18, 2017 10:10 AM | Updated Date: Jan 18, 2017 10:10 AM