Banks seek review of NFS charges

The sharp reduction in transaction charges for using ATMs on the RBI-sponsored National Financial Switch (NFS) is being reviewed following member banks' representations for a reconsideration.

The Institute for Development and Research in Banking Technology (IDRBT), which operates the NFS, had reduced charges per transaction on use of third party ATMs on the NFS platform to Rs 9, from Rs 20, with effect from October 1, 2005.

Banks found the revised charge unviable and claimed that Rs 9 per transaction did not even cover the average overhead costs.

"IDRBT has collected feedback from banks on what the access charge should be, following representations from banks (on its decision to cut transaction charges). The revised price structure is expected to be announced shortly," said Chanda Kochhar, executive director of the ICICI Bank, the only bank with a large ATM network participating in the NFS.

Banking sources said that banks have given a feedback to IDRBT to fix the interchange fee at a viable level, which would suit member banks as well as the customers.

Shared ATM networks managed by the Punjab National Bank and Euronet, an ATM service provider, charge fees of Rs 20 and Rs 25 per transaction, respectively.

The sources said that ICICI Bank had "taken out" over 40 of its ATMs in Mumbai from the NFS, following the downward revision in transaction charge, saying these ATMs were high volume ones for ICICI Bank itself and the reduction in charges had further increased their usage.

"This action by the ICICI Bank and veiled warnings for complete withdrawal, made IDRBT agree to review the cut in transaction charge," said a senior official with a public sector bank, which is a member of NFS.

IDBRT had mooted NFS about a year ago, with an aim to interconnect all the ATM networks across the country. The NFS network has 5,557 ATMs and over 12,000 transactions are carried on a daily basis through it.

As of now, NFS has 16 member banks, which comprise of public as private sector banks. The public sector banks include the Allahabad Bank, Andhra Bank, Bank of Baroda, Corporation Bank, IDBI Bank, Punjab National Bank and the Oriental Bank of Commerce.

Other than the ICICI Bank, the private sector banks in the NFS include, the Jammu & Kashmir Bank, the Karnataka Bank, the United Western Bank, the Dhanalakshmi Bank, the Tamilnad Mercantile Bank, the South Indian Bank, the Karur Vysya Bank and the Yes Bank.