RBI Allows Banks To Raise Charges For ATM Withdrawals

Police officers stand guard in front of automated teller machines in Mumbai, India. (Photographer: Adeel Halim/Bloomberg)

RBI Allows Banks To Raise Charges For ATM Withdrawals

The Reserve Bank of India on Thursday allowed banks to raise charges on automated teller machines to Rs 21 per transaction. Banks can levy charges on customers within this ceiling, once they exhaust the free transaction limit.

In a notification on its website, the regulator said the maximum charges will be revised from Rs 20 per transaction currently applicable. The new charges will be levied with effect from Jan. 1, 2022.

Bank customers are allowed five free transactions per month, if they use their own bank ATMs. When customers who use other bank ATMs to do transactions, metro customers are allowed three free transactions per month and non-metro customers are allowed five.

In June 2019, a committee headed by the chief executive officer of Indian Banks’ Association had made recommendations on ATM charges and the entire gamut of fees attached to transactions conducted on them. The committee at the time had recommended a charge of Rs 24 per transaction to customers.

The revised charges are in order to compensate banks who will have to shell out more as interchange fee from Aug. 1. In the notification, the regulator said interchange fee per financial transaction will be raised to Rs 17 from Rs 15 now. In case of non-financial transactions, the interchange fee will be revised to Rs 6 from Rs 5 at present.

Interchange fee is the charge a merchant bank pays to the card-issuing bank, each time a customer swipes their credit or debit card.

“This will incentivise banks, managed service providers and white label ATM operators to significantly increase ATM penetration in semi urban and rural areas thereby boosting the financial inclusion agenda of the RBI and Govt of India,”a spokesperson for Confederation of ATM Industry said.

According to Pranay Jhaveri, country manager India and South Asia at Euronet Worldwide, the revision in charges were long overdue.

“Both cash and digital payments are important pillars supporting the growth of the economy,” Jhaveri said. “This move will definitely give a fresh impetus to deployment of ATMs across India and help improve the penetration.”

In its notification, the banking regulator said the interchange fee structure was last revised in August 2012, while customer charges were revised in August 2014.

The RBI said the latest revision in charges were done considering the increasing cost of ATM deployment and expenses towards ATM maintenance incurred by banks and white label ATM operators.

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