How to withdraw cash from an ATM through UPI, without a card
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The Reserve Bank of India (RBI) has proposed to make cardless cash withdrawal facility available at all ATMs, irrespective of banks, through the Unified Payment Interface (UPI), one of the key decisions made by the RBI’s Monetary Policy Committee (MPC).
“At present the facility of cardless cash withdrawal through ATMs is limited only to a few banks. It is now proposed to make the facility available across all banks and ATM networks using UPI,” RBI Governor Shaktikanta Das had said while making the announcement. How will the process work and will it have any impact on debit card usage? We explain.
How will cash withdrawals via UPI work?
While the RBI did not disclose specific details on how the process will work, a person having knowledge about the matter said ATMs soon will show an option to withdraw cash using UPI. Upon selecting that option, a user would have to add the amount they wish to withdraw following which a QR code would be generated on the ATM machine. The user would then have to scan that code on their UPI app and enter their pin following which the ATM will dispense cash, the person added.
According to Das, allowing cash withdrawals through UPI would increase the security of such transactions. “In addition to enhancing ease of transactions, the absence of the need for physical cards for such transactions would help prevent frauds such as card skimming and card cloning, among others,” the RBI Governor informed.
What are the current ways of cardless cash withdrawals at ATMs?
At the moment, a few banks such as ICICI Bank, Kotak Mahindra Bank, HDFC Bank and SBI, allow their users to withdraw cash from their ATMs without a card, a feature introduced in the wake of the Covid-19 pandemic.
However, it is a long-drawn process. Users have to install apps of their respective banks and first select the option of cardless cash withdrawal on the app, followed by adding beneficiary details and the withdrawal amount. After confirming the mobile number of a user, the bank will send an OTP and a nine-digit order ID to the beneficiary’s phone. Post that, the beneficiary would have to visit an ATM and key-in the OTP, order ID, amount for transaction and mobile number to get the cash.
Besides this cumbersome process, cardless cash withdrawals have certain limits as well — such withdrawals start from Rs 100 per transaction and have an upper limit put in place by respective banks. For HDFC Bank users, such withdrawals are restricted to a maximum of Rs 10,000 each day and Rs 25,000 per month. Such withdrawals also come with a service fee of Rs 25 per transaction. At the moment, it is unclear whether UPI-based cash withdrawals would also be subject to the same restrictions and service fee.
RBI’s Deputy Governor T Rabi Sankar said that the central bank is currently working on the “systemic changes” that may need to be done and the “issues will clear in the next 2-3 months”. Das said that the RBI would soon send separate instructions to the National Payments Corporation of India (NPCI), ATM networks and banks.
Could this impact debit card usage?
Debit cards are currently the most popular way of cash withdrawals at ATMs. As of now, there are more than 900 million debit cards in the country, and experts have cautioned that allowing cash withdrawals through UPI could negatively impact debit card usage.
“There could be a potential first-order impact on debit cards as this step would reduce the need to carry debit cards. There could be a potential second-order impact on other payment forms such as credit cards and wallets since this step seems to promote ubiquity of the UPI,” said Shivaji Thapliyal, lead analyst (institutional equities) at YES Securities. “Prima facie, this step seems negative for MDR fee-generating payment form factors”.
However, to assuage these concerns, Das clarified that the issuance of debit cards would not stop due to the move since they have other uses beyond cash withdrawals, a sentiment also echoed by some industry stakeholders.
“Due to other intertwining dependencies built in the banking system for authorisation at call centres or Internet Banking and change of PIN for UPI, the issuance of debit cards may not reduce,” said Anand Bajaj, the founder, MD & CEO of PayNearby.
What’s next in the UPI pipeline?
It is projected that in the next 3-5 years, UPI would be processing a billion transactions a day, and to enable that, a number of initiatives have been introduced. Chief among these is UPI’s AutoPay feature, which has already seen increased adoption owing to RBI’s disruptive guidelines on recurring mandates. According to industry experts, the AutoPay feature will be crucial to increasing daily transactions on the platform.
The RBI has also announced UPI on feature phones without an Internet connection, which is expected to open up the payments system to more than 40 crore individuals who use such devices. This will expand digital financial inclusion and add to the number of transactions made on the platform.
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