Taking cash out of ATMs is getting costlier as the Reserve Bank of India (RBI) has approved an increase in interchange fees on ATM withdrawal from May 1, 2025. The rule will affect the customers who use the non-home bank ATMs more times than the free transactions limit. The RBI’s decision comes in the wake of increasing demand from the banks and ATM operators to raise the fees and from RBI’s own as well as government’s push to digital payments.
What is an ATM interchange fee and how it works?
An ATM interchange fee is the fee a bank pays to another bank or ATM Operator when a customers uses an ATM that does not belong to their home bank. That is, if you withdraw cash from your own bank ATM, there is no interchange fee involved, but if you use another bank’s ATM, your bank must pay an interchange fee to the bank whose ATM is being used. Your own bank in turn charges the interchange fee on you.
What are the new changes in ATM interchange fees?
Starting May 01, 2025, the customers will have to pay extra Rs 2 on cash withdrawals and Rs 1 extra on non-financial transactions at non-home bank ATMs.
- The fee on financial transactions (cash withdrawals) will be increased to Rs 19 per transaction from previous Rs 17 per transactions once customers exceed the free withdrawal limit.
- The fee on non-financial transactions such as balance inquiry, mini statements, PIN change etc will be increased to Rs 7 from Rs 6 per transaction.
What are the free ATM transactions limits?
While the RBI has increased the ATM interchange fees, the number of free transactions remain the same.
- The customers are allowed 5 free transactions per month in their own bank ATMs.
- As for other bank ATMs, the customers get 3 free transactions per month in metro cities (Delhi, Mumbai, Kolkata, Hyderabad, Bengaluru and Chennai) and 5 free transactions per month in non-metro cities.
Why has the RBI increased the ATM fees?
The hike in the ATM interchange fees come due to many reasons, primary among them are the rising operational costs, demand from the white-label ATM operators and the RBI’s continuous push for digital payments.
The banks and ATM operators have been seeking higher fees to sustain their operations citing increased costs related to security, cash management and infrastructure maintenance.
According to the data made public by RBI, NPCI and banks, the digital payment transactions volume have grown to 18,737 crore in FY23-24 from 2,071 crore in FY17-28 at a CAGR of 44% while the value of transactions grew to Rs 3,659 lakh crore in FY23-24 from Rs 1,962 lakh crore in FY17-18 at a CAGR of 11%.
The main contributing force behind the growing digital payments has been UPI. The UPI transactions volume grew to 13,116 crore in FY23-24 from 92 crore in FY17-18 at a CAGR of 129% with the value of UPI transactions reaching Rs 200 lakh crore in FY23-24 from Rs 1 lakh crore in FY17-18 at CAGR of 138%.