Customers of one bank will be allowed free use of ATMs of other banks from April 1, 2009. Customers will soon be able to walk into any bank ATM and check their account balance for free, said the RBI in its draft circular on ATMs of banks: Fair Pricing and Enhanced Access.

The central bank has rejected banks' plea to cap the number of free cash withdrawals every month by saying that such a cap was not desirable and not practical.

Banks with a large ATM network were crying foul over the free ATM usage after RBI, in its draft approach paper on ATMs of banks, had said the use of ATMs of own banks for any purpose and of other bank ATMs for balance enquiries should be free of cost with immediate effect.

For withdrawal of cash from ATMs of other banks, RBI has asked banks to cap charges at the rates prevailing as on December 23, 2007 and to reduce all charges to a maximum of Rs 20 per transaction from up to Rs 55 charged now from March 31, 2008. It has further suggested that cash withdrawals from any bank ATMs should be free from April 2009.

RBI had earlier issued an approach paper on ATM charges and stuck to its stance despite banks not expressing their opposition to completely free usage of ATMs. Earlier in the day, RBI Deputy Governor V Leeladhar in reference to a veiled threat by banks to slow down ATMs rollout said that commercial banks which were raking in huge profits needed to temper the urge to levy fee on ATM transactions.

Banks are making profits in the region of Rs 2,000-3,000 crore. Many of them are prompt to announce how they have posted profits higher than those of competing banks every quarter, Leeladhar said.

The RBI deputy governor said, in such circumstance, banks should do something for clients. The cost of setting up an ATM has come down from Rs 30 lakh a unit a few years ago to Rs 6 lakh now.

The regulator had invited comments from the general public and banks on the draft paper. Bank customers wanted the regulator to make the service free immediately instead of April 2009. On the other hand, some respondents apprehend that such a move of making service charges free may decelerate the deployment of ATMs by acquiring banks.

The Indian Banks Association (IBA) had also suggested that the number of free transactions at ATMs of other banks be restricted to two per month.

Also in metro centres, the minimum cash withdrawal may be stipulated at Rs 500 for accounts other than the no-frill ones. It had also suggested a cap to be fixed for balance enquiry as such transactions attract inter-change. This has not found favour with the regulator.

The regulator also rejected the other suggestions made by banks and IBA to permit third-party advertisement on ATMs may be permitted as a revenue stream for the banks, white-label ATMs be permitted, cash withdrawal at the point of sale may be permitted so that the load on ATMs be reduced.