The Reserve Bank of India (RBI) has announced an increase in ATM interchange fees, which will take effect on May 1, 2025. The fees for financial transactions, such as cash withdrawals, will rise by ₹2, while non-financial transactions, like balance inquiries, will see an increase of ₹1.
This change is expected to significantly impact smaller banks that have a limited number of ATMs. Although banks have not yet made a formal decision on whether to pass these increased fees onto customers, historical patterns suggest that they likely will. A senior banking official noted, “In the past decade, whenever interchange fees have gone up, banks have typically transferred those costs to customers. This instance is likely to follow the same pattern.”
Understanding Interchange Fees:
Interchange fees are charges that one bank pays another when a customer uses an ATM outside their own bank’s network. These fees are usually included in the customer’s overall transaction costs. The last adjustment to these fees was made in June 2021.
With the new rates, cash withdrawals will now cost ₹19 instead of ₹17, and balance inquiries will increase from ₹6 to ₹7.
The decision to raise these fees was communicated to banks and stakeholders by the National Payments Corporation of India (NPCI) on March 13. The NPCI sought RBI’s approval for this increase due to financial challenges faced by white-label ATM operators under the previous fee structure.
Currently, customers in metropolitan areas are allowed five free transactions per month at ATMs of other banks, while those in non-metropolitan areas can make three free transactions.
For smaller banks with fewer ATMs, this increase in interchange fees poses a significant challenge. A senior official from a mid-sized private bank explained that these banks must choose between passing the costs onto customers—potentially causing dissatisfaction—or absorbing the costs and harming their profitability. RBI’s decision to raise ATM interchange fees may lead to higher costs for customers as banks adjust their pricing strategies in response to these changes.
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