RBI increases ATM interchange fee from ₹15 to ₹17
The Reserve Bank of India (RBI) on Thursday increased the interchange fee on automated teller machine (ATM) transactions from ₹15 to ₹17. It has also hiked the fee on non-financial transactions from ₹5 to ₹6. This revised rate will come into effect from August 1, 2021. ATM interchange is the charge paid by the bank that issues the card (issuer) to the bank where the card is used to withdraw cash (acquirer).
All you need to know about the revised ATM interchange fee:
- The ATM interchange fee has been a bone of contention between banks and ATM deployment companies. The charge is divided between the acquirer and the ATM companies. This is why banks issuing ATM cards discourage customers from using other banks’ ATMs.
- In addition to this, the cap on fee that can be charged to the customer, which is capped at ₹20 per transaction, was also increased. "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 ₹21 per transaction," the RBI said. This increase will be effective from January 1, 2022.
- The revised charges are based on the report by a committee constituted by the RBI in 2019. The committee, under the chairmanship of VG Kannan, the then chief executive of the Indian Banks’ Association (IBA), reviewed the cost and its recommendations were made public in 2020.
- The committee had recommended using population as a metric for calculating ATM charges. It said there should be increase in free transactions at ATMs in all centres with population of less than 1 million (as per census 2011) to six per month, from five at present.
- For centres with more population, the committee said, the free transaction limit should be retained at three.
- It had also suggested that for ATMs in all centres with population of 1 million and above, the interchange rate should be increased to Rs17 for financial transactions and Rs7 for non-financial transactions.
- For locations with population of less than 1 million, the charges should be hiked by Rs3 in both kinds of transactions, the committee said.
“The recommendations of the committee have been comprehensively examined. It is also observed that the last change in interchange fee structure for ATM transactions was in August 2012, while the charges payable by customers were last revised in August 2014," RBI said on Thursday.