Pay More Charges For Withdrawing Cash, Using ATM Card: RBI Allows Banks To Raise Fees

The new rates will come into effect from January 1, 2022.

RBI has greenlit a hike in ATM transaction charges imposed by banks to Rs 21 per transaction.

Rs 21 is the upper limit to which banks can increase charges after customers have finished the 5 free transactions they are granted each month.


Free Transaction Limit

The new rates will come into effect from January 1, 2022.

The earlier going rate was Rs 20 per transaction, including financial and non-financial.

Customers who were using ATMs belonging to banks other than their own are allowed 3 free ATM transactions in metro cities and 5 in non-metro centres.

Revision After 7 Years

RBI has made the first hike after 7 years, when the last change in interchange fee structure for ATM transactions was in August 2012.

Charges customers had to pay were last revised in August 2014.

Reason Behind Hike

The changes are brought into place in order to compensate banks which will have to pay higher interchange fees, which currently is Rs 15 to Rs 17 come August 1.

An interchange fee is what a merchant bank has to pay to the card-issuing bank every time a customer swipes their card in the ATM.

For non-financial transactions, the interchange rate has been increased from Rs 5 to Rs 6.

The RBI has said that this decision was made in light of rising costs of installing ATMs and their maintenance.

It was also looking out for customer convenience and thereby tried to maintain a balance between that and expectations of stakeholder entities.

Potential Benefits

There are some benefits of this move. 

One is that as banks receive more money through the ATM charge hikes, banks and ATM operators will be incentivised to penetrate semi-urban and rural markets. 

Another is that more ATMs in such regions will go a long way towards the government’s financial inclusion agenda.

Customers and the overall economy stand to gain as well since cash and digital payments are significant pillars driving economic growth.

SBI Implements Changes

SBI has also made revisions in service charges for withdrawing cash from its ATMs and bank branches earlier this month.

Basic Savings Bank Deposit (BSBD) account holders now get a limit of just 4 free transactions.

After this limit is exhausted, they will have to pay Rs 15 as service charge plus GST for every transaction. 

This also applies to transactions done in ATMs of non-SBI banks.

Govt, Private Banks Allowed To Charge Extra For ATM Cash Withdrawal From This Date

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