RBI Approves Rs 2 Hike in ATM Transaction Fees

Key Facts:

RBI is the central bank of India, and regulatory body responsible for regulation of the Indian banking system and Indian currency.

It is owned by the Ministry of Finance.

Prime Highlights:

Banks with limited ATM networks are expected to be more affected by this change.

While banks have not confirmed whether they will pass the fee hike onto customers, historical trends suggest customers will likely bear the increased charges.

Key Background:

The Reserve Bank of India (RBI) has approved an increase in ATM interchange fees, with a rise of Rs 2 for financial transactions and Re 1 for non-financial transactions. This revision, which will come into effect on May 1, 2025, is expected to impact banks with limited ATM networks, especially smaller institutions.

The revised fee structure will see the interchange charge for financial transactions, such as cash withdrawals, increase from Rs 17 to Rs 19. Non-financial transactions, including balance inquiries, will incur a higher fee of Rs 7, up from Rs 6. This adjustment marks the first change in interchange fees since June 2021. Sources suggest that while banks have not yet decided whether to pass these increased fees on to customers, there is an expectation that the hike will ultimately be transferred to them. A senior bank official remarked, “Historically, when interchange fees have been revised, customers have borne the cost. This time, too, it is likely that banks will pass on the increased charges to customers.”

The RBI’s decision follows a request from white-label ATM operators who had been facing financial difficulties due to the existing fee structure. The National Payments Corporation of India (NPCI) had earlier communicated this proposal to banks and other stakeholders.

The fee increase is particularly challenging for smaller banks with fewer ATMs, as they will have to either absorb the costs, impacting profitability, or pass on the burden to customers, potentially affecting customer satisfaction. Currently, customers in metro areas are eligible for five free ATM transactions per month with other banks, while those in non-metro areas are entitled to three free transactions. This move is expected to generate additional costs for smaller banks, which could result in increased fees for customers, potentially altering the banking experience for many across the country.