RBI Hikes ATM Interchange Fees, Transactions May Cost More
The Reserve Bank of India has approved an increase in ATM interchange fees, which may result in costlier ATM transactions for customers starting May 1. Financial transaction fees will increase by ₹2, while non-financial transactions will rise by ₹1. This move is expected to particularly affect banks with smaller ATM networks, as they may incur higher costs when customers use ATMs from other banks.
What It Means for Bank Customers
Although banks have not officially decided whether to pass on the increased fees to customers, there is a strong possibility they will. In the past, similar fee hikes have typically been transferred to consumers. Industry insiders suggest this time may be no different, potentially making ATM transactions beyond the free usage limit more expensive.
Understanding ATM Interchange Fees
ATM interchange fees are charges paid by the card-issuing bank to the bank that owns the ATM used for a transaction. These fees cover both financial transactions like cash withdrawals and non-financial ones such as balance enquiries. Customers may feel the impact of these increased costs when their free monthly limit on ATM transactions is exhausted.
Revised Fee Structure
Under the new structure:
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Financial transaction interchange fees will increase from ₹17 to ₹19.
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Non-financial transaction fees will go up from ₹6 to ₹7.
These changes apply after the permissible number of free transactions is exceeded. Currently, customers are allowed five free transactions per month at other bank ATMs in metro cities and three in non-metro areas.
Challenges for Smaller Banks
The revised fees may strain banks with limited ATM networks, which will now have to pay more to other banks when their customers use external ATMs. Bank officials have noted that passing on the additional cost might upset customers, while absorbing it could impact profitability. As a result, many banks are evaluating their options, including whether to revise ATM usage policies or charges.
Likely Outcome for Consumers
While the increased interchange fees directly apply between banks, customers could soon see an adjustment in how much they are charged for ATM usage beyond free limits. As the new fees come into effect from May 1, users are advised to monitor their monthly ATM usage and keep an eye on communications from their banks regarding possible revisions in service charges.
