New charges to apply from May 1
Withdrawing cash from ATMs is set to become more expensive as the Reserve Bank of India (RBI) has approved an increase in interchange fees. From May 1, 2025, banks will be allowed to charge higher fees for ATM transactions, impacting millions of customers.
What has changed?
The interchange fee the amount banks pay each other for ATM transactions has been revised:
- Financial transactions: Increased from ₹17 to ₹18 per transaction.
- Non-financial transactions: Increased from ₹6 to ₹7 per transaction.
This means banks may pass on the extra cost to customers, leading to higher withdrawal charges, especially after the free monthly limit.
How it affects customers
Most banks offer five free ATM transactions per month at their own ATMs and three free transactions at other banks’ ATMs in metro cities. After this limit, users will likely see an increase in withdrawal charges.
For those who frequently withdraw cash, this could mean higher banking expenses.
Why the fee hike?
The RBI has justified the increase due to rising operational costs for maintaining ATMs, including cash handling, security, and technology upgrades. The last revision was in 2021, and banks have been demanding an update due to inflation and higher infrastructure costs.
Will Banks increase customer charges?
While banks have the option to absorb the extra cost, many are expected to pass it on to customers by increasing ATM withdrawal charges. However, exact charges will depend on individual bank policies.
What’s next?
With digital payments on the rise, cash usage is declining, but ATM transactions remain crucial for many, especially in rural areas. The new charges may push more people towards online transactions, further reducing cash dependency.
Customers are advised to check their bank’s updated withdrawal policies and consider minimising ATM withdrawals to avoid extra charges.
