Withdrawing money from ATMs in India will become more expensive starting May 1, 2025. The Reserve Bank of India (RBI) has approved a hike in ATM interchange fees, which will affect customers across the country. These increased charges will apply once customers exceed their free transaction limit, leading to higher banking costs for those who rely on ATMs for cash withdrawals.
What is an ATM Interchange Fee?
An ATM interchange fee is a charge that one bank pays to another when its customer uses an ATM belonging to a different bank. This fee covers the cost of providing ATM services and is usually passed on to customers as part of their banking charges. RBI decided to revise the fees after white-label ATM operators, who run ATMs independently, requested a hike due to rising operational costs.
How Much Will Customers Pay?
According to the new guidelines, customers will pay higher fees for both financial and non-financial transactions. Currently, banks allow a limited number of free ATM transactions each month. Once this limit is crossed, customers will now have to pay an additional Rs 2 per financial transaction, making the total cost Rs 19 per transaction instead of the previous Rs 17.
For non-financial transactions like checking account balances, the fee will increase by Rs 1, raising the cost from Rs 6 to Rs 7 per transaction. These changes will impact customers nationwide, particularly those from smaller banks that depend on the ATM networks of larger financial institutions.
Why Did RBI Approve the Fee Hike?
RBI approved the increase after considering the rising expenses involved in running ATM services. White-label ATM operators argued that higher electricity bills, maintenance costs, and security expenses were making it difficult for them to manage operations under the old fee structure. By allowing banks to charge more, RBI aims to help ATM operators sustain their services while keeping up with rising costs.
The fee hike is expected to affect customers who frequently withdraw cash. Those who still rely on cash-based transactions may feel the financial burden, especially if they often cross their free transaction limit. Many people who bank with smaller financial institutions may also be impacted, as these banks depend on ATMs owned by larger banks for cash withdrawal services.
Rise of Digital Payments in India
ATMs were once seen as a revolutionary banking service, offering easy access to cash. However, with the growing popularity of digital payments in India, the use of ATMs has declined. More people now prefer using online wallets, UPI (Unified Payments Interface), and other cashless options for their daily financial transactions.
According to government data, the value of digital payments in India increased from Rs 952 lakh crore in FY14 to Rs 3,658 lakh crore in FY23. This shift towards cashless transactions has reduced the dependency on ATMs, but many customers still prefer withdrawing cash for small expenses.
Will This Push More People Toward Digital Payments?
With higher ATM fees, some customers may turn to digital payments to avoid extra charges. This trend is already visible, as more businesses and consumers embrace cashless transactions. However, for those who depend on cash withdrawals, the new fee structure could lead to additional financial pressure.
As May 1 approaches, customers are advised to keep track of their ATM usage and explore digital payment options to avoid exceeding their free transaction limits. By understanding the new fee structure, they can better manage their banking expenses and adapt to India’s evolving financial landscape.
