SBI halves daily ATM withdrawal to Rs 20,000: The bank has done the right thing; the move will discourage use of cash

State Bank of India (SBI) has done well to limit cash withdrawals per day by its classic and maestro cardholders to Rs 20,000 from today (31 October 2018) from the hitherto generous limit of Rs 40,000 ). Those wanting to withdraw more will have to upgrade to superior versions of its debit card which are premium ones entailing greater minimum balance.

SBI has given two reasons for the halving of withdrawals limits—frauds being facilitated when there are higher withdrawal limits and encouragement to digital payments. The first is a weak alibi. Frauds could have been stopped by mandating OTP (one-time password) even for ATM (automated teller machine) withdrawals, especially for withdrawals beyond say Rs 5,000. Be that as it may, but what SBI is doing now has already been done by many other banks. Indian Overseas Bank (IOB), for example, allows on its classic cards withdrawals per day of Rs 25,000 but one can withdraw a maximum of just Rs 15,000 through one insertion. In other words two insertions would be needed to withdraw 15000+ 10,000=25000.

SBI, however, is on dot on its assertion that its move would discourage cash. In the USA, ATMs almost appear to be an extinct species what with they being few and far between. It is so because cards are used more for swiping at retail establishments rather than for insertion into the ATM withdrawal slots. In India, it is the other way round.

Indeed, ATMs tantalise by their mere existence. It is not only its ubiquitous presence in urban centers that tantalises withdrawals but also its cheek-by-jowl existence almost in a cluster—5 to 6 ATMs in a single small shopping complex with each bank not wanting to be left out and following Me-Too behavior.

An ATM machine cost Rs 20 lakh around five years ago. Now it should be costing more what with most of them being imported and the rupee steadily going down against the greenback. Back-of-the-envelope calculations show that as many as 400 swiping machines can be bought for the cost of an ATM. In addition, ATM needs close monitoring through CTV and guards. It also involves rent for space. None of these are applicable to swiping machines.

Banks in India must, therefore, dismantle ATMs and simultaneously install more and more swiping machines for their trade customers. It is a win-win for both. Both are spared the burden of handling cash. Both save on time and cost. Both are freed of record-keeping to that extent. Small wonder even air hostesses swipe cards up in the stratosphere in many parts of the globe.

There could be consumer resistance to swiping cards but it must be won over. After all it is much easier to use cards to pay rather than to withdraw. Old people and the uneducated fumble at ATMs and call for assistance. But at retail establishments, all that they have to do is to give their cards to the retailer and make sure that he has entered the right amount. In other words, debit cardholders must morph from existing ATM fixation to swiping fixation which incidentally also allows them to rein in their expenditure. It is tedious to keep track of cash payments whereas the bank itself does this for you. All that one has to do is to periodically go through the bank statement.After all swiping is not an online transaction or payment. Netbanking payment needs some computer and net literacy.

SBI has done the right thing. Before dismantling ATMs, banks must discourage their usage by further reducing the per day withdrawal limit to just Rs 5,000. One may bristle at this suggestion saying what about marriage and funeral expenses. For these exigencies, one must be made to go to the bank branch and withdraw through cheques. What SBI did earlier by imposing charges for withdrawing more than the permitted number of times was wrong. What it has done now is right.

(The author is a senior columnist and tweets @smurlidharan)