RBI Permits Banks to Increase ATM Withdrawal Fees

The Reserve Bank of India approved a levy of Rs 21 per transaction on automated teller machines on Thursday. Once a customer's free transaction limit has been reached, banks may charge them up to this amount. 

The authority stated on its website that the maximum costs will be reduced from the present Rs 20 per transaction. The increased fees will go into effect on January 1, 2022. 

If customers use their own bank ATMs, they are entitled to five free transactions each month. Clients who use other bank ATMs are limited to three free transactions per month for metro clients and five for non-metro customers. 

In June 2019, a committee chaired by the chief executive officer of the Indian Banks' Association issued recommendations on ATM charges and the whole range of costs associated with transactions completed on them. Customers will be charged Rs 24 for each transaction, according to the committee's recommendation at the time. 

The revised fees are intended to compensate banks that will have to pay a higher interchange fee beginning August 1. The regulator stated in the statement that the interchange charge per financial transaction will be increased to Rs 17 from Rs 15 now. In the case of non-financial transactions, the interchange charge would be increased from Rs 5 to Rs 6. 

Each time a consumer swipes their credit or debit card, the merchant bank pays an interchange fee to the card-issuing bank. 

"This will incentivise banks, managed service providers and white label ATM operators to significantly increase ATM penetration in semi-urban and rural areas thereby boosting the financial inclusion agenda of the RBI and Govt of India," a spokesperson for Confederation of ATM Industry said.

According to Pranay Jhaveri, Euronet Worldwide's national manager for India and South Asia, the fee modification was long overdue.

"Both cash and digital payments are important pillars supporting the growth of the economy," Jhaveri said. "This move will definitely give a fresh impetus to the deployment of ATMs across India and help improve the penetration."

The banking regulator stated in its statement that the interchange fee structure was last amended in August 2012, while customer charges were changed in August 2014.

The RBI stated that the most recent modification in charges was made in light of the rising cost of ATM deployment and the expenditures spent by banks and white label ATM operators for ATM maintenance.

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