Starting May 1, withdrawing cash from ATMs in India will become more costly as the Reserve Bank of India (RBI) has approved an increase in ATM interchange fees. This change means that customers who frequently use ATMs will incur extra charges once they exceed their limit of free transactions.
An ATM interchange fee is the amount one bank pays another for ATM services, and this cost is typically passed on to customers as part of their banking fees. The RBI’s decision to raise these fees came after white-label ATM operators requested adjustments due to rising operational costs affecting their businesses.
The fee increase will be implemented across the country and is expected to impact customers of smaller banks, which depend on larger financial institutions for ATM services and infrastructure, making them more susceptible to increased costs.
From May 1, customers will face an additional charge of Rs 2 for each financial transaction beyond their free limit. The fee for non-financial transactions, such as checking account balances, will increase by Rs 1. Consequently, withdrawing cash from an ATM will now cost Rs 19 per transaction, up from Rs 17, while checking account balances will cost Rs 7 per transaction.
ATMs, once considered a groundbreaking banking service, are facing challenges in India due to the growing popularity of digital payments. The convenience of online wallets and UPI transactions has significantly decreased the demand for cash withdrawals.
Government statistics reveal that digital payments in India were valued at Rs 952 lakh crore in FY14, and by FY23, this amount had surged to Rs 3,658 lakh crore, indicating a substantial shift toward cashless transactions. With the new fee increase, customers who still rely on cash may feel the financial strain, potentially pushing them further toward digital payment options.
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