All banks allow free transaction upto five times per month from ATM terminals of other banks. This facility is however pinching banks. Banks have requested National Payments Corporation of India, which operates the National Financial Switch to reduce switching fees so that their costs can be brought down.

The last nine months have also seen the addition of 8,957 ATMs in the country thereby increasing the ATM usage by customers. Most of customers are now aware of the five free transactions they are entitled to and thus make appropriate usage of it.

Banks are having trouble with this because it is leading to increase in their costs. When a customer transacts from ATM of some other bank, then the home bank has to pay the other bank a transaction fee of Rs 20 per transaction. Also since most of ATMs are now routed through NFS, banks have to pay NFS a sum of Rs 0.50 per transaction.

Furthermore, for every balance enquiry made by a person using ATM other than home ATM, the home bank has to pay a transaction fee of Rs 5 in addition to service tax. Also a switching fee of Rs 0.50 has to be paid to NPCI.

Thus at one place when banks want a dip in switching fees, they do not want transaction fees to be lowered as it would affect their 'other income'.