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New Rs 500 currency notes being withdrawn at an ATM.IANS

The central government is currently considering a proposal to capping free cash withdrawals in ATM to just three, from the previous 8-10. This includes withdrawals from banks, where one already has a bank account. 

The latest move comes to support cashless economy. The proposal was put forth by bankers and was discussed with Finance Minister Arun Jaitley in pre-budget consultations. "A proposal to bring down free ATM transactions to three per month has been discussed with the finance ministry, and this is one of the measures being considered to disincentives use of cash," a senior banker was quoted as saying by the Economic Times. 

Also read: RBI removes restrictions on withdrawals

Another banker quoted by the publication said that the decision (of waiving off transaction charges) was taken when things were different (post demonetisation), but things have changed now and we need to change with that. "If only three free transactions are allowed, then people will be inclined to shift to digital transactions," he added. 

According to the report, banks presently permit customers five free ATM transactions every month, after which, they charge Rs 20 per transaction. It includes service tax. However, for non-customers, lender banks offer up to three free transactions in six metro cities (Delhi, Mumbai, Chennai, Kolkata, Bengaluru and Hyderabad). The rules were established in November 2014.

Banks had earlier said that since November, ATM transactions reduced by 10-20 percent. "If the number of transactions on ATMs comes down, then we will have to figure out a strategy to discourage cash. One can look at increasing transaction charges at ATMs to improve the economics of doing business, but the government wants to reduce transaction cost for customers, so that may not happen," the person quoted above added.