From next year, RBI has asked the banks not to charge customers for use of third-party ATMs. With this it will be possible for the customer of small private banks, with a single ATM will have access to ATMs as the customer of the bank with the largest network.
From April 2008 the central bank has made available, free access to third-party ATMs for the purpose of balance enquiry and also the banks cannot inflict a transaction charge of more than Rs 20 per transaction on customers who withdraw from third-party ATMs.
On the implementation of this regulation by the RBI, the state owned banks with foreign branches have requested the regulator to discriminate between domestic and foreign banks, when it comes to allowing customer access to shared ATM networks.
Even the public sector banks have raised the issue of reciprocity, as they are allowed very limited access in overseas markets — both in terms of branches as well as ATMs. In India, the Reserve Bank of India grants licenses to set up branches and ATM installations and customers of foreign banks can access third-party ATMs, often free of charge.
For instance, although SBI has got the license to set up 25 outlets in Singapore, the country’s largest bank will not have access to the domestic network. However it can share foreign bank’s ATM network in Singapore. The matter was discussed during the informal meetings.
Bankers say the overseas regulators place a restriction on them with regard to access to their local markets, the Indian market is willy-nilly being opened up further. A decade ago, majority of banking transactions used to be carried out through the branch; today most of the foreign and private banks customers use the internet for the same. This is followed by automated teller machines. Even subscriptions to new services such as credit cards and demat accounts are also done outside the branches.
In India foreign banks are building up retail assets through non-banking finance companies, which do not have any restrictions on branch expansion. Bankers are of view considering that interest in India is quite high, so this is a good time to put conditions of reciprocity on foreign banks.
Recently, the central bank has given branch licenses to a couple of foreign banks who do not have a branch presence here. It is being considered that licensing would be more liberal from 2009, since RBI has promised foreign banks greater access to the Indian market.