9 September 2014

Dr Raghuram Rajan
Governor,
Reserve Bank of Inda
!ort, "umba#
Sub: Usage of ATMs Rationalisation of number of free transactions.
Ref: RBI Circular No. RBI/2!"#!$/!%& '(SS C).(' No. *!+/2.!.2/2!"#2!$ ,ate,
August !"- 2!" a,,resse, to all ban.s
$hs "emorandum from "one%&fe !oundaton s submtted to %ou n response to the above referred
'r'u&ar ssued b% RBI to a&& banks n the 'ountr% on the subje't of ()sage of *$"s + Ratona&,aton of
number of free transa'tons- .h'h has 'aused 'onsderab&e && fee&ng and resentment among the
bankng pub&'#
*s %ou ma% be a.are "one%&fe !oundaton s ded'ated to the 'ause of spreadng fnan'a& &tera'% n
our 'ountr%## *s a part of our obje'tve, .e engage n advo'a'% and take up ssues .th regu&ators to
smoothen the mpa't of ther po&'es on the pub&' at &arge and savers and nvestors n part'u&ar#
/e, therefore, .sh to apprse %ou the reasons for su'h unhappness among the bank depostors over the
proposed 'hanges n the ru&es re&atng to use of *$"s and .sh to suggest .a%s and means to redu'e
the mpa't of these 'hanges on the hap&ess pub&' so as to enab&e %ou to meet ther reasonab&e
e0pe'tatons to the e0tent possb&e#
Memoran,um submitte, b/ M01 to RBI on !% 2anuar/ 2!"
/e nvte %our knd attenton to a memorandum submtted b% us to RBI on 11 2anuar% 2014, 3a 'op% of
.h'h s en'&osed for %our mmedate referen'e4 seekng %our ndu&gen'e n 'ontnung .th the e0stng
gude&nes n the matter of *$" operatons .hen there .as a hue and 'r% over the &a'k of se'urt% n
*$" kosks n the .ake of a bruta& atta'k on a &ad% 'ustomer of a pub&' se'tor bank n Banga&ore &ast
%ear# /e had e&aborate&% e0p&aned to %ou n our above memorandum the benefts derved b% the
bankng ndustr% due to the pro&feraton of *$"s n the 'ountr%, resu&tng n substanta& mprovement
n the 5urrent and Savngs deposts 35*S*4 of banks .th 'onsderab&e savng n manpo.er 'ost .h'h
has been a great b&essng to the 'ommer'a& banks n our 'ountr%#
But unfortunate&%, RBI has smp&% gnored our p&ea and gone ahead .th the revson as sought b%
Indan Bank6s *sso'aton 3IB*4 n the name of ratona&,aton of number of free transa'tons as per the
5r'u&ar referred above# $he revsed ru&es restr'tng the free usage of *$"s are patent&% unfar and
dstn't&% aganst the nterest of the depostors as .e&& as the banks for the fo&&o.ng reasons7
1# It s the bas' rght of an ndvdua& to .th dra. the amount deposted b% hm8her n a bankng
nsttuton .henever re9ured and ths rght of a bank depostor has been re'ogn,ed a&& over the
.or&d# !or the frst tme, banks n Inda are mposng a &ev% for .thdra.ng ther o.n mone%
from ther o.n bank and ths s aganst the prn'p&e of so'a& just'e#
2# :ven no. depostors are free to .thdra. ther mone% through the bran'hes of banks .thout
an% 'harges# *nd t s on&% the banks .ho, n ther o.n se&f nterest, ntrodu'ed the s%stem of
a&&o.ng .thdra.a&s through the *$"s set up them# *$"s .ere set up ostensb&% for the
beneft of the depostors, but n rea&t%, t .as the banks .ho beneftted b% askng the 'ustomers
to go to *$"s to .thdra. mone% to brng do.n ther o.n 'ost of operatons .h'h the%
a'heved to a great e0tent# $he substanta& benefts derved b% banks sn'e the ntrodu'ton of
*$"s have been e&aborate&% 'overed n our ear&er memorandum submtted to %ou on the 11
th
of
2anuar%, 2014#
;# <o. .hen the 'ustomers are used to .thdra. 'ash through the *$"s, f the banks &ev% a
'harge for su'h .thdra.a&, the% .&& be for'ed to go ba'k to the banks= bran'hes and dra. 'ash
through the age o&d method of ssung a se&f 'he9ue for 'ash .thdra.a&, $hs .&& not on&%
burden the banks, but more mportant&% the% .&& not be ab&e to serv'e the 'ustomers eff'ent&%
be'ause of the smp&e reason that the number of bank a''ounts have gro.n e0ponenta&&%,
makng t vrtua&&% mpossb&e for banks to ph%s'a&&% serv'e these &arge number of a''ount
ho&ders a'ross ther 'ounters#
4# B% &ev%ng su'h a heft% 'harge be%ond 'ertan number of transa'tons n *$"s, t s no.
'ertan&% 'heaper for the 'ustomers to dra. 'ash usng 'he9ue &eaves, for .h'h banks toda% &ev%
on&% a nomna& 'harge of Rs#2 to Rs#; per 'he9ue &eaf used# $hs .ou&d vertab&% redu'e the use
of *$"s to the detrment of banks as t .ou&d add to the .oes of bank bran'hes, .ho are
strugg&ng .th mu'h &o.er staff sn'e ntrodu'ton of 'ore bankng so&utons and pro&feraton of
*$"s#
># *s %ou are a.are, banks are 'hargng Rs#1008? @ ta0es per %ear for ever% *$" 'um debt 'ard
ssued to the depostors# In addton to ths, banks have no. started 'hargng a mnmum of
Rs#A08? per %ear for sendng S"S messages to the depostors .henever a transa'ton s effe'ted
n the a''ount# *&& these 'harges add up to a substanta& 'ost for the smp&e sn of mantanng a
bank a''ount n our 'ountr%#
A# Depostors .ho keep ther surp&us 'ash n ther savngs a''ount are no. gettng a pa&tr% nterest
of 4B p#a# .h'h, %ou .&& appre'ate, s a negatve rate of return on a''ount of the hgh rate of
nf&aton preva&ng n the e'onom%# B% &ev%ng a 'harge for .thdra.a& of ther o.n mone%,
bank depostors are ht .th a doub&e .hamm%, tantamount to addng nsu&t to njur%#
1# $he settng up of *$"s b% banks s to redu'e not on&% the pressure on ther 'ounters, but a&so to
redu'e 'ost of operatons through automaton# B% &ev%ng 'harges for use of *$"s be%ond
Moneylife Foundation 305, 3rd Floor, Hind Service Industries Premises, Off. Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai 400028. Tel: 022-49205000 (Board) Fax: 022-49205022
a 'ertan number, banks are s'utt&ng the optmum ut&,aton of te'hno&og%, thus deprvng the
benefts of te'hno&og% to banks= 'ustomers#
C# It has been the e0peren'e of bank 'ustomers that .hen the% dra. 'ash from *$"s, the% do not
get the notes n the re9ured denomnatons as the% have no opton to do so# *&& the *$"s
dspense notes ether of hgher denomnatons or a&& notes n one sng&e denomnaton# !or
e0amp&e, f one .thdra.s Rs#>0008? he gets on&% fve 100 rupees notes and the rest n Rs#>00
'urren'% notes# $o obvate ths dff'u&t%, man% depostors .thdra. 'ash from *$"s n t.o or
three tran'hes to get more number of 100 rupees 'urren'% notes# *s other.se, he has to agan go
to the bran'h of the bank to e0'hange and get re9ured denomnaton notes, resu&tng n e0tra
.ork to a&& 'on'erned# $herefore, to mnm,e these prob&ems, *$"s shou&d be desgned to
provde 'ash n denomnatons re9uested for b% the 'ustomer b% modf%ng the *$" ma'hne to
provde for ths fa'&t%# $hs .&& a&so redu'e the number of transa'tons n *$"s#
9# $here s a&.a%s the prob&em of fake 'urren'% notes beng dspensed b% *$"s, .h'h 'a&&s for a
permanent so&uton# RBI shou&d .ork out a mode& to safeguard the nterest of bank depostors
but provdng nstant e0'hange of su'h fake notes, f the 'ustomer tenders su'h fake notes .thn
a reasonab&e tme of .thdra.a&# $o obvate ths prob&em, banks shou&d not be a&&o.ed to
outsour'e the .ork of &oadng the 'ash nto the ma'hnes to unkno.n, unre&ab&e sub?'ontra'tors,
.ho 'an p&a% ms'hef .th the 'urren'% notes beng &oaded theren# $o ensure fu&&?proof s%stem,
banks shou&d 'onsder puttng sea&ed 'assette 'artrdge nto the *$" ma'hnes to prevent
tamperng .th the &oose notes stuffed nto the ma'hnes no.# $&& ths s ntrodu'ed, *$"s
shou&d have the te'hno&og% to verf% the genuneness of the notes dspensed, and *$"s shou&d
automat'a&&% shut do.n even f one fake 'urren'% note passes through#
10# *''ordng to the statst's provded b% RBI n ther .ebste, t s observed that for the month of
*pr&, 2014, the average amount of .thdra.a& through *$" per transa'ton .as of the order of
Rs#;,14A#C>, .h'h nd'ates that the *$" operatons are genera&&% done b% mdd&e and the
&o.er mdd&e '&ass popu&aton of our 'ountr%# $o mpose addtona& 'harges for .thdra.a& on
su'h .eaker se'ton of our popu&aton s unjustfed, as most of these have hand?to?mouth
e0sten'e#
11# Despte repeated nstru'tons of RBI, ver% &tt&e has been done to make a''ess to *$"s eas% and
smooth for dsab&ed peop&e n our 'ountr%# In the absen'e of 'onvenen'e to dsab&ed peop&e to
eas&% a''ess and operate *$"s, banks have no rght to 'harge su'h heft% fees for *$"
operatons#
12# $he most rrtatng feature of our *$"s s that .hen %ou need them most, the% go out of order#
It s a 'ommon feature to see *$"s not .orkng even durng .orkng hours .h'h for'es man%
'ustomers to go for another bank=s *$" &o'ated nearb%, .h'h, n effe't, .&& no. add to ther
burden of havng to she&& out addtona& fees for no fau&t of thers#
Moneylife Foundation 305, 3rd Floor, Hind Service Industries Premises, Off. Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai 400028. Tel: 022-49205000 (Board) Fax: 022-49205022
1;# /h&e the RBI dktat seeks to mpose a 'ost on the 'ustomer, there s no ob&gaton on banks to
ensure serv'e 9ua&t%# /e therefore, .sh to pont out that ths dktat be'omes unfar and
un'onsttutona& be'ause t mposes a pena&t% on the 'onsumer .thout an% responsb&t% and
punshment on banks that fa& to have .orkng *$"s# $here s no montorng s%stem to ensure
that *$"s .ork#
3e nee, Automate, T4an.ing Mac4ines 5ATM6 as ban.s nee, to be grateful to t4eir customers
for using ATMs:
It s a fa't of &fe that *$"s have be'ome a part and par'e& of modern da% bankng a&& over the .or&d# It
s reported that banks n 5anada, n order to .oo and appease &o%a& 'ustomers, have 'onverted
*utomated $e&&er "a'hnes nto Automate, T4an.ing Mac4ines b% dspensng through *$"s,
besdes 'ash, goodes &ke to%s, 'andes and man% other surprses n'&udng brth da% greetng 'ards, f t
happens to be the brth da% of the *$" operatng 'ustomer, thereb% takng bankng to a ne. orbt of
de&ghtfu& e0peren'e#
*s aganst these deve&opments, t s ron'a& that banks n our 'ountr% are pena&,ng the 'ustomers for
.thdra.ng ther o.n hard earned savngs he&d b% banks n trust for them# $he most nvsb&e beneft
derved b% the ntrodu'ton of *$"s s the mu'h &o.er per'entage gro.th n 'ustomer 'omp&ants as
'ompared to the gro.th n number of a''ounts, as *$"s have su''eeded n brngng do.n the footfa&&s
n bran'hes of banks resu&tng n mu'h &esser fr'ton bet.een bank staff and 'ustomers, .h'h s a
dstn't beneft not rea&,ed b% the bankng ndustr% n our 'ountr% so far#
/e ma% further add that f RBI hopes that 'ompetton .&& drve banks to offer better terms to
'ustomers than pres'rbed b% RBI, %ou .&& be sore&% dsapponted be'ause past e0peren'e does not
nspre an% 'onfden'e to ths effe't# RBI had granted freedom to banks to f0 ther o.n nterest rates on
savngs bank deposts 'oup&e of %ears ba'k .th the hope that 'ompetton as .e&& as market d%namsm
.ou&d drve SB nterest rates# But unfortunate&%, not a sng&e bank n the pub&' se'tor has made an%
'hanges to SB nterest rates .h'h 'ontnue to be 4B pa for the &ast severa& %ears a'ross a&& banks,
barrng a handfu& of sma&&er prvate banks, nd'atng a semb&an'e of 'arte&saton n the bankng
ndustr% as .e&&#
)ur suggestions for /our .in, consi,eration:
In order to 'reate a 'ustomer frend&% atmosphere n the bankng ndustr% and to ensure that the fnan'a&
n'&uson msson no. aggressve&% propagated b% the 5entra& Government be'omes a su''ess n the
rea& sense of the term, .e .ou&d &ke to put before %ou the fo&&o.ng three suggestons for favour of
%our knd 'onsderaton7
!. Restore unlimite, usage of ATMs b/ ban.s to t4eir o7n customers:
Moneylife Foundation 305, 3rd Floor, Hind Service Industries Premises, Off. Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai 400028. Tel: 022-49205000 (Board) Fax: 022-49205022
Davng regard to varous fa'ts stated above, .e re9uest %ou to re'onsder %our de'son and nstru't
banks to permt un&mted usage of *$"s b% banks for ther o.n 'ustomers as e0stng at present and
thus 'reate an envronment of trust and good.&& bet.een the banks and ther 'ustomers# $hs sng&e step
.&& 'onsderab&% redu'e the anger and angush 'aused b% ths ne. ru&e of &mtng the
number of 'ash .thdra.a&s .th out 'harges from one=s o.n bank, .h'h s, to sa% the &east, unknd to
a &arge part of bank=s 'ustomers#
2. Restore ,ifferential 8ricing for cas4 an, non#cas4 transactions as treating t4em as e9ual for
le:/ of c4arges is unfair:
It s unjust to 'harge Rs#208? for both 'ash and non?'ash transa'tons as man% of the non?'ash
transa'tons are n the nature of en9ures .h'h n a&& farness shou&d be made ava&ab&e free of a&&
'harges, as t does not nvo&ve an% addtona& 'ost to the bank &ke feedng 'ash et'# "oreover these
serv'es are justfab&% made ava&ab&e free on the 'ounters of bran'hes, and to &ev% a 'harge for su'h
serv'es sma'ks of unfar trade pra't'e# /e therefore, re9uest %ou to make a dstn'ton bet.een 'ash
and non?'ash transa'tons and ether make a&& non?'ash
transa'tons tota&&% free, or &ev% a nomna& 'harge of Rs#28? for su'h transa'tons n the nterest of e9ut%
and farness#
*. Intro,uce a s/stem of Re8orting of )ut of )r,er ATMs )n#line b/ ban. customers:
It s ver% 'ommon to fnd a number of *$"s reman out of order on a''ount of varous reasons
n'&udng nade9ua'% of 'ash, 'onne'tvt% prob&ems or .ant of e&e'tr' po.er n the *$" kosks# *nd
su'h non?fun'tonng of *$"s are a drag on the banks besdes 'ausng n'onvenen'e to the banks=
'ustomers, .ho have to bear addtona& 'ost to dra. 'ash from other banks= *$"s# $hough t s
e0pe'ted of banks to montor proper fun'tonng of a&& ther *$"s on rea& tme bass n ther o.n se&f
nterest, n a'tua& pra't'e t s observed that *$"s reman suspended for da%s together# /th a ve. to
mnm,e su'h nstan'es of *$"s remanng noperatve and redu'e ther do.n tme .e .ou&d &ke to
put for.ard the fo&&o.ng suggeston for %our 'onsderaton7
$he suggestons mentoned above .&& he&p n stream&nng the *$" operatons n the 'ountr%, .h&e
makng the banks a''ountab&e for ther serv'e 9ua&t% and responsb&e for proper mantenan'e of *$"s
at a&& tmes# $he banks n turn, f the% .sh, 'an pass on ths burden of 'ompensatng the 'ustomers to
those 5ompanes from .hom the% have outsour'ed the .ork of mantanng *$"s b% enterng nto
approprate agreements to make them a''ountab&e for ther a'tons and na'tons# $hs step .&& go a
&ong .a% n mprovng 'ustomer serv'e and he&p the banks a&so n mproved ut&,aton of the *$"s for
mutua& beneft#
If RBI s favourab&% n'&ned to 'onsder ths proposa&, .e .ou&d be happ% to ds'uss ths matter further
.th %our department 'on'erned to make ths nnovaton a rea&t%, thereb% gvng a shot n the arm to the
*$" operatons n our 'ountr%#
Moneylife Foundation 305, 3rd Floor, Hind Service Industries Premises, Off. Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai 400028. Tel: 022-49205000 (Board) Fax: 022-49205022
/e are sure ths memorandum .&& re'eve the attenton t deserves and .e sha&& be gratefu& for a &ne n
a'kno.&edgement and a.at %our ear&% 'omp&an'e#
/e thank %ou for %our tme and attenton and &ook for.ard to hear from %ou at %our ear&est
'onvenen'e#
Eours sn'ere&%,
!or "one%&fe !oundaton,
Su'heta Da&a& Debashs Basu
!ounder?$rustee !ounder?$rustee
39C201412;A4 39C200CA;2A4

Moneylife Foundation 305, 3rd Floor, Hind Service Industries Premises, Off. Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai 400028. Tel: 022-49205000 (Board) Fax: 022-49205022