ATM Cash Withdrawals to Become Expensive? Know Full Details

According to media reports, the Confederation of ATM Industry (CATMI) has approached the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) to propose an increase in the interchange charge levied on customers for using ATM service of the bank. Customers pay this fee when they withdraw cash from ATMs using ATM cards issued by the banks. 

CATMI wants to increase the interchange to a maximum of ₹23 for each transaction. The bank that issues the card pays fees to the bank where the card is used to withdraw cash.

What is Interchange Fees?

"There are no freebies in the financial services industry", an unsaid law for the workers in the finance industry. Interchange fees imposed on bank customers can be understood in the following simple terms:

“Each time a customer of one bank uses an ATM that is operated by another, the first bank will be required to pay a fee to the other bank.” 

What is the current status?

Currently, banks provide savings bank account users with a minimum of five free transactions every month. Three transactions are free at any ATM operated by any other bank. 

The ATM interchange fee was increased from ₹15 to ₹17 in 2021. The maximum amount that could be charged to a consumer at that time was raised from ₹20 to ₹21 per transaction.

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What is the CATMI proposal?

Stanley Johnson, executive director of ATM maker AGS Transact Technologies gave a quote to the Economic Times regarding the interchange fees saying that the interchange rate was last raised two years ago. He added, "The last time, it took several years to hike this but I feel everyone is aligned and it's only a matter of time before the (fee) increase will happen." CATMI has suggested an increase to ₹21, while some other ATM manufacturers have advocated boosting the price to ₹23. Private banks and operators of white-label ATMs had been pushing for an increase in the interchange charge.

"There has been a heavy lobbying across for increasing the interchange rate," stated a different ATM manufacturer. He further added that banks have also consented to a rate hike, and a representation has been sent through NPCI. "The increase in the interchange fee is a decision taken by the NPCI because the rate is fixed by them."