The Reserve Bank of India (RBI) on Thursday allowed an increase in the interchange fee constitution for ATM transactions after nearly 9 years, considering the increasing cost of Automated Teller Machines (ATM) deployment and expenses towards ATM maintenance incurred by the banks and white label ATM operators.
Accordingly, the RBI has hiked the interchange fee per transaction from Rs 15 to Rs 17 for financial transactions and from Rs 5 to Rs 6 for non-financial transactions in all centres, effective August 1, 2021.
The card issuing bank pays an interchange fee to the operator of the ATM when a customer makes a transaction at an ATM that doesn’t belong to the card-issuing bank. Currently, the card-issuing bank pays an interchange fee of Rs 15 for each and every cash transaction and Rs 5 for each and every non-cash transaction.
The ATM operators had been pushing for a hike in interchange for some time now but banks were not on the same page on the issue as, in the long run, the additional cost would need to be borne by the customers.
The RBI had, back in June 2019, constituted a committee to review all the gamut of ATM charges and fees with a specific focus on interchange constitution for ATM transactions.
“The recommendations of the committee have been comprehensively examined. It is usually observed that the final change in interchange fee constitution for ATM transactions was once in August 2012, while the charges payable by customers were final revised in August 2014. A substantial time has thus elapsed since these fees were final changed,” the RBI said revising the interchange fees for ATM transactions.
The RBI has also said that customers will be eligible for five free transactions, which includes financial and non-financial transactions, each month from their own bank ATMs. And, they are going to be eligible for three free transactions (both financial and non-financial) from other banks’ ATMs in metro cities. In non-metro centers, customers will have the ability to do five transactions (financial and non-financial) from other bank ATMs.
Beyond the prescribed number of free transactions that a customer is eligible to do from other bank ATMs’, currently, they’re charged Rs 20 per transaction. But, RBI has now hiked this interchange fee from Rs 20 to Rs 21 per transaction, effective January 1, 2022.
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