Banks should spare ATM users and squeeze big loan defaulters instead

The Indian Banks’ Association’s plea for charging users in urban areas of other banks’ ATMs is just plain squeamish and reeks of small mindedness. As it is, using the ATM of a bank one has account with is completely free without limits but using other banks’ ATMs beyond the fifth time in a month entails user charges of Rs 20 per withdrawal for the sixth and subsequent withdrawals a month.

The immediate provocation for the move is heightened cost-Rs 40,000 per month per ATM-following heightened security arrangements put in place after the attack on an ATM user at Bangalore a few months ago. The IBA forgets that the raison d’etre of ATM from banks’ viewpoint is sizeable savings in manpower cost at bank branches. Shouldn’t they be taking the cost of heightened security in their stride then?

It is time banks stopped spreading themselves thin in a spirit of me-too. It is common to find five or six ATMs cheek in jowl in a small shopping complex. Many of them hardly witness a transaction during the course of a day. If telecom companies can share towers, there is no reason why they cannot share ATMs. In other words, banks must go the whole hog and share commonly owned and operated ATMs from the present dispensation of condescending to allow other banks’ customers to use their ATMs. That would make for more optimum utilization of ATMs.

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The resulting cost savings would not be inconsiderable. Incidentally, that would also be the precursor for fuller integration of nationalized banks through merger. A Canara Bank is no different from a Punjab National Bank with their owner being the same-the government of India. Competition, to be meaningful, must be among different owners not with oneself.

Furthermore, banks in India enjoy a spread-difference between the average lending rate and borrowing rate from depositors-of more than 10 percent. It should be enough to allow the savings bank account holders the basic facility of withdrawing from any ATM.

Banks in India instead of caviling at customers and otherwise tilting at windmills must focus on recovering their dues from big-ticket borrowers many of whom neither pay interest nor the principal. They blithely cock a snook at the naivet of banks that routinely reschedule their repayment schedules under the euphemism corporate debt restructuring. Ever greening is another trickery through which loans are shown as repaid with fresh loans!

Loan and interest recovered on time marks an efficient bank from an inefficient one. A clean balance sheet in India has come to mean write off of bad debts with fresh equity infusions every now and then whereas it ought to mean near 100% recovery rate.

One hopes Raghuram Rajan rejects IBA’s plea with the contempt it deserves and urges them to recover the dues from borrowers if necessary through adversarial proceedings including sale of mortgage assets. Defaulters have been mollycoddled and saving account owners taken for granted for too long. It is time the trend is reversed.