With the Reserve Bank of India (RBI) authorizing an increase in ATM interchange fees, debit card users may soon have to pay extra to withdraw cash from ATMs. The RBI has approved an increase of Rs 2 for financial transactions and Rs 1 for non-financial transactions, raising ATM interchange costs. The adjustment will take effect on May 1.
Although banks have yet to decide whether to pass on the increased interchange charges to customers, it looks that they will eventually pay the price. This means that banks clients will have to pay more out of pocket to withdraw cash from ATMs.
What is the ATM interchange fee?
The first bank is required to pay the other bank a charge each time a customer of one bank uses an ATM that was installed by the other bank. This is referred to as interchange fees for ATMs. This cost is typically computed as a percentage of the transaction and is frequently reflected in the customer's bill.
How big is the planned fee increase?
Interchange fees for non-financial activities, like checking balances, have gone up from Rs6 to Rs7, while those for financial operations, such cash withdrawals, have gone up from Rs17 to Rs19.
A bank user in a metro area can currently use other banks' ATMs for five free transactions per month, but in a non-metro area, they can only use the ATMs for three.
Why has the interchange fee increased?
The National Payments Corporation of India (NPCI) notified the decision to alter interchange rates to banks and other stakeholders in response to a request from white-label ATM operators who were struggling financially under the current price structure.
