Next time you go to an ATM to withdraw cash, don't worry about the banknotes getting sucked back by the machine if not collected immediately, as RBI has asked all banks to immobilise the 'cash retraction facility'.

At the same time, customers will have to be extra careful in collecting the cash dispensed by the ATM, as they cannot later claim the money from the bank, which was the case when this 'cash retraction facility' was in place at the ATMs.

Most of the banks, including HDFC Bank, Axis Bank and Canara Bank, have already removed the cash retraction facility from all their ATMs, while the withdrawal process for this facility is underway for few remaining ATMs.

As per RBI directions, the banks are communicating to their customers about the withdrawal of this facility, under which the cash goes back into the ATM machine if not collected within a stipulated time, which is generally 10-15 seconds, but varies from bank to bank.

The facility was initially implemented to avoid the cases of someone else getting the money, if the actual cardholder forgets to collect the withdrawn cash before leaving the ATM.

However, RBI in the past one year has come across banks reporting several instances of frauds pertaining to mis-use of cash retraction facility at the ATMs.

The typical modus operandi has been to hold on to a few pieces of notes in ATM machines that have cash retraction system, while allowing one or two pieces of notes to be retracted and then claiming non-receipt of cash.

Since retracted transactions are credited back to the customer's account, the balance in the fraudster's account remains unaffected even after collecting bulk of the delivered cash.

The ATMs do not have the capability to count the pieces of retracted notes, thus leaving a loophole for committing such frauds.

RBI discussed the matter at a special meeting of the National Financial Switch Steering Committee, where disabling of ATM cash retraction facility was suggested as one of the possible solutions.

RBI accepted the suggestion and after a successful pilot project decided to ask the banks to disable cash retraction facility at all their ATMs.

The Reserve Bank also asked the banks to educate the customer on the consequences of cash retraction and the reasons for disabling this facility, display information regarding disabling cash transaction at each and every ATM location and ensure wide propagation.

The central bank also sought flashing of the message on the ATM machine before the transaction and has asked the banks to ensure that new ATMs being installed do not provide cash retraction features.

In its notice to customers, HDFC Bank said: "The Cash Retraction Facility on ATMs has been disabled as per an RBI mandate.''

"The cash will remain in the ATM dispenser tray till the time it is not collected and will not get retracted into the ATM.''

"The bank has also asked its customers to ensure that they collect the entire cash withdrawn through the ATM before leaving the ATM and "the bank would not be liable for any financial loss on account of failure to collect the cash from the ATM dispenser tray. "

In a similar message, Canara Bank has informed its cardholders that the retraction of cash by ATM has been disabled as per RBI directives and they should ensure collecting cash before leaving the ATM room.

Axis Bank said that as per the RBI guidelines, it is mandatory to remove 'cash retract' feature from the ATMs.

"In line with the RBI directive, we at Axis Bank have taken out the 'Cash Retraction' facility from our ATM's machines. Do not forget to collect your cash as the cash will not be retracted in the ATM machine and will remain in the mouth of the ATM till the time the cash is not collected," it said.

Similar communications are being made by various other banks to their customers.