The ATM usage of a third party is soon going to be free for the customers and therefore it is expected that the banks would alter their inter-change fee to compensate the cost.

One can swap a debit card at another lender's automated teller machines (ATMs) without any cost from April 1st. The change is expected to increase the business for the large banks as they have higher accessibility that would facilitate customers on using the nearest ATM.

On the other hand, small banks that would allow its account holders to access any ATM without any charge fear that big players may take an advantage and demand for higher inter-change fee in the coming times. A senior executive with a bank said, "In the long run, the nature of inter-change agreements that banks enter into may also change."

However it is believed that for the smooth ATM deployment, inter-change fee should be kept at the current levels. "For sustainable ATM deployment to continue, it would be imperative that the inter-change fees be maintained at the current levels," said Aspy Engineer, vice-president for alternate channels of Axis Bank.

An inter-change fee is charged by the banks for providing the facility to the customers of other banks. The fee charged by the banks depends on the terms of bilateral and multilateral agreements between them. Normally the banks that have a wider ATM network consider the inter-change fee as an important source of revenue and therefore they may raise their charge to scale up the revenues.

Aspy Engineer said, "We expect our inter-change transactions to increase by 10-15% and the number of transactions involving our customers using other ATMs may increase by 7-10%." Currently the outside customers that are using the bank's ATM are almost four times more than its own customers using third party ATMs.

Head of direct banking channels of HDFC Bank, Sanjeev Patel said, "We have over 3,500 ATMs and we will be a net acquirer when the new ATM rule comes into force. Inter-change fees will continue to show a downward trend. But we expect the increase in the number of inter-change transactions from our ATMs to more than make up for the decrease in revenue due to lower inter-change fees. Our ATM roll-out strategy will continue as planned."

Meanwhile PSU Banks that do not have a large ATM network said that they are planning to move forward on their expansion plans. Union Bank of India's Chairman and Managing Director M V Nair said they plan to install 500 ATMs in the next fiscal, especially at new branches. "The ultimate plan is to cover talukas and the remaining 100 districts in the country," he said.

Syndicate Bank Chairman and Managing Director, George Joseph said, "The inter-change fee will be a key factor, but the cost of transacting business through an ATM is significantly lower than through a branch, so we will continue to expand our ATM business."

At the same time, IndusInd Bank Managing Director and CEO Ramesh Sobti said that the nature of the ATM business would be defined through the free-market principles in the coming times. "Banks will have to see if it makes more sense to buy ATM services or own ATMs. It may be more feasible for banks with smaller networks to pay for ATM transactions rather than roll out their own," he said.

The average cost of installing an ATM in an urban city is Rs 7-8 lakh and the monthly cost of operating it comes to around Rs 50,000-60,000. Therefore if an inter-change fee is lower than the amount then it would not be reasonable for the banks to set up new ATMs.