Mumbai: The Reserve Bank of India (RBI) wants commercial banks in India to stop charging consumers for using automated teller machines (ATMs) from April 2009.

Some banks charge as much as Rs57 for one transaction when customers use the ATMs of other banks for cash withdrawals and balance enquiry. There are 31,078 ATMs across India.

In a draft proposal released on its website on Monday, ATMs of Banks: Fair Pricing and Enhanced Access, the Indian banking regulator said the charges levied on the customers vary from bank to bank and also vary according to the ATM network that is used for the transaction.

Extra charges: A Deutsche Bank ATM in New Delhi. Currently, some banks charge as much as Rs57 for one transaction when customers use the ATMs of other banks for cash withdrawals and balance enquiry.

“Consequently, a customer is not aware, beforehand, of the charges that will be levied for a particular ATM transaction, while using an ATM of another bank," the report said. “This generally discourages the customer from using the ATMs of other banks. It is, therefore, essential to ensure greater transparency."

According to RBI, in an ideal situation the customer should be able to access any ATM installed in the country free of charge. “The process may be ensured, if necessary, by regulatory intervention by way of setting service charges considered reasonable," it said.

The regulator has suggested a three-stage migration to free ATM usage by bank customers. In the first phase, the use of own ATMs and the use of other bank ATMs for balance enquiries should be free of cost and there should not be any increase in charges prevailing as on 23 December.

Banks that are charging more than Rs20 per transaction should reduce the charges to Rs20 per transaction by 31 March. And, finally, all ATM transactions should be free for all accounts with effect from April 2009.

RBI said that generally the charges per transaction range from Rs10 to Rs20 for cash withdrawal and Rs5 to Rs8 for balance enquiry. The switching fee levied by the switch providers varies from zero to Rs3 per transaction.

“When a bank customer uses an ATM of a bank other than his/her own bank, it is reasonable that the service charge that the customer pays should reflect the interchange fee that his/her bank will pay to the ATM-owning bank and switching fee, if any," RBI said.

K.V.S. Manian, group head, retail liabilities and branch banking for Kotak Mahindra Bank, said if the RBI suggestion is implemented, it will not affect the profitability of his bank. “Anyway, we don’t charge our customers more than Rs20 per transaction," said Manian.

“I don’t think banks charge customers to make profit. RBI recently waived its national financial switch charges and we have passed that benefit to our customers," said Bank of Maharashtra chairman M.D. Mallya.

According to a general manager of a public sector bank, 25% of all banking transactions happen through ATMs.

However, ATM usage of private sector banks is many times more than that of state-run banks. Private banks, such as ICICI Bank Ltd and HDFC Bank Ltd, among others, and foreign banks such as Citibank NA normally encourage most customers to use ATMs, or use the Web or a telephone, rather than visit branches.