ATM cash withdrawals to become costly? RBI plans to raise interchange fee, says report | Mint

The Reserve Bank of India (RBI) is planning to raise the maximum fees that banks can charge customers for exceeding the “free five transactions” limit and the ATM interchange fees, reported the Hindu BusinessLine news portal, citing people aware of the development on Tuesday, February 4.

This increase in charges will mean that banking customers will have to pay more from their pockets to withdraw cash from the ATMs. 

How much is the proposed fee increase?

The news portal’s report, citing people aware of the development, reported that the National Payments Corporation of India (NPCI) has recommended increasing the maximum cash transaction fees to ₹22 from its current level of ₹21 per transaction after the completion of the five-free limit.

The payments regulator NPCI, after consultation with the industry, also recommended increasing the ATM interchange fee to ₹19 for cash transactions from its current level of ₹17. The non-cash transactions are recommended to be increased to ₹7 from ₹6, according to the news report. 

An ATM interchange fee is a charge that a bank pays to another bank to use the ATM services; this fee is usually a percentage of the transaction and is often bundled with the customer’s bill.

According to the news report, the banks and white-label ATM operators are on board with NPCI’s plan to increase the fees for metro and non-metro areas.

Reserve Bank of India and NPCI did not respond to the news portal’s queries on this development, according to the report. 

“The RBI formed a second committee under chairmanship of IBA CEO, officials from SBI and HDFC Bank. After assessing the cost for both private and public sector banks, we made recommendation in September last year. We said while NPCI’s recommendation can be kept (for metro areas), the real issue is in rural and semi-urban areas,” reported the news portal, citing one of the people cited above.

According to the news portal’s report, the ATM industry players and bankers said that the cost of operating ATMs has increased in non-metro areas due to higher inflation, 1.5-2 per cent incrementally higher borrowing costs in the last two years, higher transportation, cash replenishment and compliance costs.

(LiveMint couldn’t independently verify the report.)