The Reserve Bank of India (RBI) has approved an increase in ATM interchange fees, raising charges by ₹2 for financial transactions and ₹1 for non-financial transactions.
The revised rates will come into effect from May 1, 2025. This move is expected to impact both banks and customers, especially smaller banks with a limited ATM network.
Let’s take a closer look at the impact of the increased ATM interchange fee, how it will affect customers, and what banks plan to do in response.
What is ATM Interchange Fee?
ATM interchange fees are charges that banks pay to ATM service providers when their customers use another bank’s ATM. The interchange fee is an essential component of the banking infrastructure, ensuring that ATMs remain operational and accessible to customers nationwide.
How Much Have the Charges Increased?
The RBI has announced the following hikes in ATM fees:
✔ Financial Transactions – Increased by ₹2 per transaction
✔ Non-Financial Transactions – Increased by ₹1 per transaction
These changes will significantly affect banks with fewer ATMs as they rely more on third-party networks for providing ATM services to their customers.
Why Did RBI Approve the ATM Fee Hike?
The decision to increase ATM interchange fees comes after multiple demands from banks and ATM operators. The following reasons have contributed to this hike:
- Rising Operational Costs – Maintenance, security, and cash management expenses for ATMs have increased over the years.
- Technology Upgrades – ATMs require regular upgrades to maintain security standards and introduce new features like biometric authentication.
- Increased ATM Usage – With digital transactions on the rise, ATMs still remain crucial for cash withdrawals, requiring continuous investment in ATM infrastructure.
- Inflation and Cost Pressures – Rising inflation has increased costs for banks, making it necessary to revise ATM charges.
Impact of ATM Fee Hike on Customers
Although banks have not officially announced whether they will pass this fee increase onto customers, experts believe it is inevitable. Historically, whenever interchange fees were revised, banks transferred the cost to their customers.
How Customers May Be Affected
✔ Higher ATM Withdrawal Fees – Banks may raise ATM withdrawal charges beyond free limits.
✔ Reduced Free Transactions – Customers may get fewer free ATM transactions per month.
✔ Higher Charges for Third-Party ATMs – Using ATMs of other banks may become more expensive.
A senior bank official stated, “Whenever interchange fees were revised over the past 10 years, banks always passed the changes on to customers. This time will be no different.”
How Many Free ATM Transactions Do Banks Offer?
Currently, banks allow a limited number of free ATM transactions per month. The standard limits for free ATM usage are:
- Metro Cities – 3 free transactions at other bank ATMs
- Non-Metro Cities – 5 free transactions at other bank ATMs
- Transactions beyond these limits attract charges, which may now increase due to the revised interchange fees.
Will Digital Transactions Be Affected?
The increase in ATM withdrawal charges may push more customers toward digital transactions. However, many still rely on cash, especially in rural areas and small towns.
Experts believe that while UPI and mobile banking are growing, cash remains king for many sectors, and ATMs will continue to be in demand despite increased charges.
Impact on Banks and ATM Operators
The ATM fee hike will affect banks differently, depending on their ATM network size.
✔ Smaller Banks – Will bear higher costs as their customers frequently use ATMs of other banks.
✔ Larger Banks – May benefit since they have extensive ATM networks and receive interchange fees from other banks.
✔ White Label ATM Operators – Companies operating third-party ATMs will likely gain revenue from the fee hike.
Customers’ Reaction to Increased ATM Fees
Many customers have expressed concerns about rising banking charges. With monthly maintenance fees, cheque book charges, and SMS alert fees, an increase in ATM withdrawal charges adds another burden to account holders.
How Can Customers Avoid Extra ATM Charges?
- Use Digital Payments – Shift to UPI, mobile banking, or net banking for payments.
- Withdraw in Bulk – Instead of frequent small withdrawals, withdraw a higher amount at once.
- Use Own Bank’s ATMs – Transactions at your bank’s ATM are usually free within set limits.
- Check Fee Structures – Stay updated with your bank’s fee policies to plan withdrawals smartly.
Conclusion: Should Customers Be Worried?
The RBI’s approval of higher ATM interchange fees means that banking costs are likely to increase for customers. While banks have not officially announced changes to customer fees, history suggests that they will eventually pass the costs to account holders.
To avoid higher charges, customers should maximize free transactions, switch to digital payments, and monitor their banking habits carefully.
