From UPSC perspective, the following things are important :
Prelims level : VG Kannan committee
Mains level : Read the attached story
VG Kannan committee
- The RBI has set up a six-member committee, headed by VG Kannan, Chief Executive, Indian Banks’ Association, to review the ATM interchange fee structure.
- It aims for giving a fillip to ATM deployment in unbanked areas.
Terms of reference
- The committee will review the existing structures and patterns of costs, charges and interchange fees for ATM transactions.
- It will also review the overall patterns of usage of ATMs by cardholders and assess the impact, if any, on charges and interchange fees.
- It will assess the entire gamut of costs in respect of the ATM ecosystem and make recommendations on the optimal charge/interchange fee structure and pattern.
Why appoint such committee?
- When a customer transacts at another bank’s ATM, his bank has to pay an interchange fee to the other bank.
- The cost of operating ATMs has steadfastly increased.
- Hence, Banks and white-label ATM operators (WLAOs) want the RBI to raise ATM interchange fee from ₹15 to ₹18 for cash withdrawals and card-to-card fund transfers, and from ₹5 to ₹8 for other non-financial transactions.