Withdrawing cash from ATMs will become more expensive from May 1, as the Reserve Bank of India (RBI) has announced an increase in interchange fees. Customers exceeding their free transaction limits will face higher charges, making cash withdrawals costlier.
What is an ATM interchange fee?
An interchange fee is the amount a bank pays another bank or an ATM service provider when a customer withdraws cash from an ATM not owned by their bank. This fee is often transferred to customers as part of their banking expenses.
The RBI revised these charges following multiple requests from white-label ATM operators, who claimed that rising maintenance and operational costs were squeezing their margins. The higher fees aim to compensate for the growing expenses of running ATM networks.
How much will customers pay now?
From May 1, the fee for financial transactions beyond the free limit will rise by Rs 2, bringing the total charge to Rs 19 per transaction. Non-financial transactions, such as balance inquiries or mini statements, will see a Rs 1 increase, making them cost Rs 7 per transaction.
These revised charges will be applicable across the country, impacting customers who frequently withdraw cash, particularly those from smaller banks. Since smaller banks rely on larger financial institutions for ATM infrastructure, the fee hike may put additional pressure on customers who have limited ATM options.
A push towards digital payments?
ATMs were once considered a game-changer in banking, but their importance has been declining due to the rise of digital transactions. The widespread adoption of Unified Payments Interface (UPI), mobile wallets, and Internet banking has significantly reduced the need for physical cash.
Government data shows that India’s digital payments surged from Rs 952 lakh crore in FY14 to Rs 3,658 lakh crore in FY23, reflecting the massive shift towards cashless transactions. With the increased cost of cash withdrawals, more customers might switch to digital payments, further accelerating this trend.
The RBI’s move aligns with India’s growing push for a digital economy, but for those who still depend on cash, the additional charges could be a burden.
