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The hike is part of an RBI-approved revision based on a proposal by the National Payments Corporation of India (NPCI).
The Reserve Bank of India (RBI) has approved an increase in ATM interchange fees, media reports said. According to reports, the Central Bank has agreed on raising the fee by Rs 2 for financial transactions and Re 1 for non-financial transactions. The new charges will take effect from May 1.
What is an ATM interchange fee?
There is nothing free in the financial services industry. Every time a customer of a particular bank uses an ATM of another bank for any transaction – be it financial or non-financial – the former bank has to pay a fee to the other bank. This fee, usually a fixed amount per transaction, is called an ATM interchange fee.
What will the new fee be?
The new fee after this hike will be as follows:
- For financial transactions i.e. cash withdrawal: It will be increased from Rs 17 to Rs 19 per transaction.
- For non-financial transactions i.e. balance inquiries and other such things: It will be raised to Rs 7 per transaction from the existing Rs 6.
Will this move impact customers?
The bank often passes on this fee to customers as part of their banking costs. While there is nothing clear yet on whether this fee hike will be passed to customers or not.
The hike is part of an RBI-approved revision based on a proposal by the National Payments Corporation of India (NPCI).
The hike in the ATM interchange fees comes in the backdrop of white-label ATM players and banks lobbying for the revision. These players said the current fees were too low to keep their business profitable.
Will it increase digital payments?
ATMs, once considered a game-changer, have witnessed a dip in the footfall following the widespread adoption of Unified Payments Interface (UPI). The surge in digital payment, especially after the coronavirus pandemic, has significantly reduced the dependency on ATMs as people can transfer money, check their balance and do several other things using their smartphones.
According to government data, India’s digital payments surged from Rs 952 lakh crore in FY14 to Rs 3,658 lakh crore in FY23.
