Mumbai: The largest public sector bank, State Bank of India (SBI), which incidentally also has one of the biggest ATM network in the country is still reluctant to join the National Financial Switch (NFS). This is one of the major hurdles faced by RBI which is contemplating  free cash withdrawals for customers across ATM networks of various banks. Earlier, the Institute for Development and Research in Banking Technology (IDRBT) a RBI subsidiary had decided to waive the inter-bank ATM transaction fee, which was levied for providing the facility of routing transactions of various member banks. 

SBI views its large ATM network as a competitive edge over other banks and it is justified also because the bank has made huge investments in building the country's largest ATM network. Sharing this network with other banks without any charge will result in the bank losing this competitive edge. On the other hand, banks that do not have comparable networks will gain tremendously as their customers will be able to withdraw funds from all the ATM's.

RBI believes that bank customers in India are charged excessive fees for withdrawing funds using other bank's ATMs or even for balance enquiry. Keeping with its drive towards making the procedure of withdrawing cash from ATM's of other banks free of charge from April 2009, RBI posted an approach paper in the public domain. RBI has proposed that a maximum of Rs.20 should be charged for cash withdrawal from third party ATMs from March 31, 2008.

Banking sources believe that for a system of free cash withdrawal from ATMs after 2009 to work, the banks who have relatively smaller ATM networks and large customer transactions will have to compensate the banks who have invested heavily in this infrastructure or ramp up their ATM network. A banker from public sector said, "the interchange fee, which banks pay each other, will have to be retained, and since the central bank’s mandate of not passing it on to the customers can not be bypassed, it will have to be worked out amongst banks."

Under the present arrangement, banks with a smaller ATM network have bilateral agreement with bigger players and pay interchange fees to such banks, but the irony is that this fees is passed on to the customers. Customers have to shell out Rs.57 for cash withdrawal or Rs.20 for balance enquiries if they use an ATM, which doesn't belong to their parent bank. These charges, which lack transparency and vary from bank to bank are a big deterrent for customers to use other bank's ATM network.