RBI Increases ATM Withdrawal Charges by Rs.2 from May 1

Cash withdrawals from ATMs will cost more as the Reserve Bank of India (RBI) has increased the ATM interchange fees from May 1.

Customers who go over their free monthly transaction limits will have to pay extra fees for both financial and non-financial transactions. Under the new rules, an additional charge of Rs.2 will apply for each financial transaction beyond the free limit.

At present, bank users in metro cities can make 5 free transactions at other banks or ATMs each month, while those in smaller cities get 3 free transactions.

For non-cash transactions, from May 1, the charge for cash withdrawal will rise from Rs.17 to Rs. 19 per transaction. In the same vein, checking your account balance at an ATM will be Rs.7 as opposed to Rs. 6.

What are the reasons for the increase in ATM fees?

The RBI has decided to increase ATM transaction fees after white-label ATM operators requested a hike. They argued that their rising expenses were making it harder to run their businesses.

An ATM interchange fee is a charge one bank pays another for using its ATM. This is typically transferred to consumers. Currently, with the hike in fee, consumers may have to spend more when they withdraw cash from ATMs.

The nationwide charges will take effect, and smaller banks are expected to bear the brunt.

Important Changes

From May 1, ATM withdrawals will become more expensive. Customers will have to pay Rs. 2 extra per financial transaction once they exceed their free withdrawal limit. The charge for withdrawing cash will rise from Rs. 17 to Rs. 19, while financial transactions such as balance checks will be Rs. 1 more expensive.

This shift will probably impact customers of smaller banks more. It could also encourage individuals to make digital payments rather than withdraw cash. The National Payments Corporation of India (NPCI) made these new fees public after ATM operators complained that the existing fees were too low to meet their expenses.

Decrease in ATM Usage and Increase in Digital Transactions

ATMs, once a key part of banking, are being used less these days as more people prefer digital payment methods like UPI and mobile wallets. Government data shows that digital transactions in India were worth Rs.952 lakh crore in FY14, but this jumped to Rs.3,658 lakh crore by FY23, highlighting a big move towards cashless payments.

With the recent increase in ATM withdrawal fees, those who still use cash may have to pay more. This could encourage even more people to switch to digital payments.