Mumbai: The automated teller machine (ATM) industry wants the central bank to increase the interchange fee for ATM transactions because of the increased costs of running the channel, impact of demonetization and a fall in transaction volumes. Interchange fee is what banks pay each other for the use of other banks’ ATMs by their customers.

The representation is being led by the National Payments Corp. of India (NPCI), which has held discussions with public sector banks and private sector lenders separately, two people close to the development said on condition of anonymity.

The demand for raising the rate is being led by private sector banks. Some large public sector banks, however, are against the increase; a rise in charges will lead to higher costs for them, said one of the two persons cited above, an executive director of a leading public sector bank.

“We also said that our charges are very high and if you increase the fee, public sector banks are bound to lose due to cost escalation as they are the net issuers. We not only issue normal debit cards but also Rupay cards. In this case, they (NPCI) are finding out the costs that are being incurred by public sector and private sector banks. And after ascertaining the costs they will discuss with all stakeholders and decide the rate," the banker said. 

He added that since private sector banks started setting up ATMs before public sector banks, they had a locational advantage.

Nevertheless, he admitted the security charges and recalibration of machines due to the issue of new currency notes has led to additional costs for all banks. Recalibration of machines for accommodating new currency cost about Rs3,000 per machine. 

So-called white label ATM operators, which are non-bank entities that set up, own and operate ATMs, have also sought an increase in the interchange fee. Ravi Goyal, managing director of AGS Transact Technologies, which manages over 60,000 ATMs, said the firm has made a “representation to RBI with all facts and figures to increase it (interchange fee) to at least Rs18"; the current charge of Rs15 is not sufficient to cover costs, he said. 

 After the November 2016 demonetization of high-value banknotes, and the subsequent emphasis on digital transactions, ATM transactions have declined, which has led to several banks rationalizing their ATM network. 

 “When it is not viable I will shut it (ATM). The ATMs that did business based on transactions were shut. It is not just me but everybody has done it because cash is still not coming in. When demonetization happened, I still had to pay the rent and electricity. Hence, my cost remained same without any revenue," said V. Balasubramanian, president, digital payments, FSS, which manages over 40,000 ATMs in the country adding that between November 2016 and June 2017 the industry had lost about Rs400 crore. 

Balasubramanian said nearly 50% of the ATMs are managed on a monthly fee and the remaining are based on transactions. 

 The viability issue is also discouraging the industry from deploying more ATMs. “Cash flow and profitability is linked to the revenue we make on every transaction. The ATM companies are under stress as ATM management costs have increased and due to this not much new deployment is happening," said Himanshu Pujara, managing director, Euronet Services India Pvt. Ltd. 

A senior banker at Union Bank of India confirmed that the banks have collectively sought an increase in the interchange fee.

“The representation is being led by the NPCI. Every member bank thinks that ATM management cost has increased. We are in loss. Minimum wages of security guards, housekeeping costs and monitoring charges have gone up but the (interbank) charges have remained the same. The increase being sought is marginal," he said.

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