New Delhi: With the Reserve Bank of India (RBI) approving an increase in ATM interchange fees, debit card users may soon have to spend more to use the cash withdrawal facility at ATMs. The RBI has approved a hike of Rs 2 for financial transactions and Re 1 for non-financial transactions, increasing the ATM interchange fees. The revision will be effective from May 1.
Although banks have not yet decided whether to pass on the higher interchange costs to customers, it appears that customers will ultimately pay the price. This means that banking customers would have to spend extra out of pocket to withdraw cash from ATMs.
What is an ATM interchange fee?
When a customer of one bank uses an ATM installed by another, the first bank is required to pay the other bank a fee each time. This is called ATM interchange fees. This fee is usually calculated as a percentage of the transaction and is often included in the customer’s bill.
How much is the proposed fee increase?
The interchange fees for financial transactions, such as cash withdrawals, have gone up from Rs 17 to Rs 19, while those for non-financial activities, like checking balances, have gone up from Rs 6 to Rs 7.
Currently, a bank user in a metro area can make five free transactions on other banks’ ATMs each month, whereas in a non-metro area, the number of free transactions is limited to three.
Why has the interchange fee increased?
The decision to revise interchange fees was communicated to banks and other stakeholders by the National Payments Corporation of India (NPCI) following a request from the white-label ATM operators who had been struggling financially to operate under the current price structure.