Daijiworld Media Network – New Delhi
New Delhi, Mar 27: With effect from May 1, withdrawing cash from ATMs will become more expensive as the Reserve Bank of India (RBI) has announced a hike in ATM interchange fees.
The new charges will impact customers who exceed their free monthly transaction limits, as they will be required to pay additional fees for both financial and non-financial transactions. As per the updated structure, customers will incur an additional Rs 2 per financial transaction beyond their free limit.
Currently, bank users in metropolitan areas are allowed five free transactions at other banks' ATMs, while those in non-metropolitan areas get three free transactions per month.
For non-financial transactions, such as balance inquiries, the fee will increase by Rs 1. This will raise the cost of withdrawing cash from an ATM to Rs 19 per transaction, up from the current Rs 17, while checking an account balance will now cost Rs 7 per transaction.
Why are ATM fees increasing?
The decision to raise ATM transaction fees follows requests from white-label ATM operators who argued that rising operational expenses were affecting their businesses.
An ATM interchange fee is the charge one bank pays another for facilitating an ATM transaction, and it is typically passed on to customers as part of banking costs. In this case, the RBI has increased these charges in response to pressure from ATM operators seeking to offset higher operational costs.
The increase in charges will be applicable nationwide and is expected to impact customers of smaller banks the most. These banks depend on larger institutions for ATM infrastructure, making them particularly vulnerable to rising costs.
Key changes:
Rs 2 extra per financial transaction beyond the free limit.
Rs 19 per cash withdrawal, up from Rs 17.
Rs 1 increase for non-financial transactions like balance checks.
Customers of smaller banks likely to face more impact.
The shift towards digital payments will likely accelerate as ATM withdrawals become costlier.
The National Payments Corporation of India (NPCI) has communicated the revised charges to banks and other stakeholders following pressure from ATM operators struggling under the existing pricing structure.
Rise of digital transactions and decline in ATM usage
Once a cornerstone of banking services, ATMs have seen a decline in usage in recent years due to the rapid adoption of digital payment methods, such as UPI (Unified Payments Interface) and mobile wallets. According to government data, digital transactions in India were valued at Rs 952 lac crore in FY14 but surged to Rs 3,658 lac crore by FY23, reflecting a major shift towards cashless transactions.
With the introduction of this new fee hike, customers who still rely on cash transactions may now face additional costs, further accelerating the ongoing shift towards digital payment solutions.