Key Points:
- Effective Date: The Reserve Bank of India (RBI) has increased ATM interchange fees starting May 1, 2025.
- New Charges: Financial transaction fees will rise from ₹17 to ₹19, and non-financial transaction fees will increase from ₹6 to ₹7.
- Impact: Smaller banks with limited ATM networks are expected to face significant financial strain, while customers may see higher ATM charges.
New Delhi: The Reserve Bank of India (RBI) has approved a hike in ATM interchange fees, marking the first revision since June 2021. Effective May 1, 2025, the charges for financial transactions, such as cash withdrawals, will increase by ₹2 to ₹19. Non-financial transactions, including balance inquiries, will now cost ₹7, up from ₹6.
The decision comes after requests from white-label ATM operators and banks struggling with rising operational costs due to inflation and compliance requirements. The National Payments Corporation of India (NPCI) communicated the revised fee structure to banks on March 13.
What Are ATM Interchange Fees?
ATM interchange fees are charges paid by one bank (Bank A) to another bank (Bank B) when a customer of Bank A uses Bank B’s ATM. These fees are typically passed on to customers through service charges. For example, if you use an ATM outside your bank’s network after exhausting your free monthly transactions, these revised fees will apply.
Currently, customers in metro areas are allowed five free transactions per month, while those in non-metro areas get three free transactions at ATMs of other banks.
How Will This Impact Customers?
While banks have yet to finalize whether they will pass on the increased costs to customers, industry experts believe it is inevitable. A senior banking official stated, “Over the past decade, every revision in interchange fees has been passed on to customers. This time will be no different.”
This means that after exhausting free monthly transactions, customers may face higher charges for both financial and non-financial activities at ATMs.
Challenges for Smaller Banks
The fee hike is expected to disproportionately affect smaller banks with limited ATM networks. These banks rely heavily on other banks’ ATMs for their customers’ transactions, leading to higher payouts under the new fee structure.
A senior official from a mid-sized private bank explained:
- Passing on the additional costs could upset customers and lead to dissatisfaction.
- Absorbing the increased fees would negatively impact profitability.
Smaller banks now face a tough decision on how to manage this financial burden without alienating their customer base.
Why Was the Fee Hike Approved?
The revision was driven by rising operational costs for white-label ATM operators and banks. These include increased expenses for cash transportation, replenishment, and compliance with regulatory standards. The fee hike aims to ensure financial viability for ATM operators while maintaining service quality.
What’s Next?
As May 1 approaches, banks are expected to announce their revised customer service charges. Customers should monitor updates from their respective banks and plan their ATM usage accordingly to avoid additional costs.
For smaller banks, this development highlights the need for strategic decisions regarding fee absorption or customer pricing adjustments.
The RBI’s decision to hike ATM interchange fees reflects the growing operational challenges faced by the banking sector. While the move aims to support financial sustainability for ATM operators, it could lead to higher costs for customers and increased pressure on smaller banks. As these changes take effect, both banks and customers will need to adapt to this evolving financial landscape.
