RBI Approves Hike In ATM Interchange Fees. See How This Will Impact Your Daily Transactions

Banks are yet to finalise whether they will pass on the increased costs to customers. However, industry discussions suggested that customers would eventually bear the additional charges.

The central bank has increased the charges by Rs 2 for financial transactions and Re 1 for non-financial transactions.

Source : PTI

The Reserve Bank of India (RBI) approved a hike in the ATM interchange fees, set to be implemented from May 1, 2025. The central bank has increased the charges by Rs 2 for financial transactions and Re 1 for non-financial transactions. The revised charges are expected to impact smaller banks more due to their limited ATM infrastructure.

Banks are yet to finalise whether they will pass on the increased costs to customers. However, industry discussions suggested that customers would eventually bear the additional charges.

Will This Impact The Customers?

Citing a senior bank official, The Financial Express reported, “Whenever interchange fees were revised over the past 10 years, banks always passed the changes on to customers. This time will be no different, and banks are expected to hike fees for customers."

Interchange fees refer to the amount one bank pays another when a customer uses an ATM outside their home bank. This cost is often included in customer service fees. The last revision in these charges took place in June 2021.

Under the updated structure, the charge for financial transactions, such as cash withdrawals, increased from Rs 17 to Rs 19. Meanwhile, non-financial transactions, including balance inquiries, will now be charged at Rs 7, jumping from the earlier rate of Rs 6.

Challenges for Smaller Banks

The National Payments Corporation of India (NPCI) informed banks and stakeholders about the approved fee increase on March 13. “NPCI had requested an approval from the RBI to implement the hike in interchange fees,” the report noted citing sources.

The revision followed requests from white-label ATM operators who were struggling to maintain operations under the previous fee structure. Currently, customers in metro areas can utilise five free transactions per month at ATMs of other banks, while those in non-metro areas are allowed three free transactions.

“The additional payout from small banks to other banks due to the increased interchange fees is likely to be significant,” the report stated quoting a senior official from a mid-sized private bank.

The official explained that banks with limited ATM networks face a tough choice. If they choose to pass on the hike, it could end up frustrating customers, however, absorbing the increase will negatively impact profitability.