RBI raises ATM interchange fee on each financial & non-financial transaction from 1 August

June 11: The Reserve Bank of India (RBI) on Thursday raised the interchange fee that banks can charge on automated teller machine (ATM) transactions to ₹17 from ₹15 per financial transaction. ‘Interchange fee’ is paid by the card issuing bank to the ATM operator when a customer uses another bank’s ATM. In other words, using other banks’ ATMs beyond the free limit will be costlier now for the customers. Further, the interchange for non-financial transactions has also been increased to ₹6, from ₹5 earlier, with effect from 1 August, 2021.

Currently, the card-issuing bank pays an interchange fee of Rs 15 for each cash transaction and Rs 5 for each non-cash transaction. This fee has been a bone of contention between banks and ATM deployment companies, with the latter seeking a hike in the fee to ₹18 per transaction from ₹15 earlier. The changes announced on Thursday are based on the recommendations of a committee set up in June 2019 under the Chairmanship of the Chief Executive, Indian Banks’ Association to review the entire gamut of ATM charges and fees, with a particular focus on the interchange structure for ATM transactions.

Beyond the free transactions, the ceiling/cap on customer charges is Rs 20 per transaction. “To compensate the banks for the higher interchange fee and given the general escalation in costs, they are allowed to increase the customer charges to Rs 21 per transaction. This increase shall be effective from January 1, 2022,” the RBI said.

RBI also said that customers are eligible for five free transactions, inclusive of financial and non-financial transactions, every month from their own bank ATMs. They are also eligible for free transactions from other bank ATMs, which include three transactions in metros and five in non-metros.