The Reserve Bank of India (RBI) has announced an increase in ATM interchange fees, making cash withdrawals more expensive starting 1 May 2025. This move, reported by Doordarshan (DD) News, will impact customers who frequently use ATMs, leading to higher transaction costs.

 

An ATM interchange fee is a charge that banks pay one another for providing ATM services to customers. These costs are often passed on to account holders. For instance, an HDFC Bank customer withdrawing money from an SBI ATM in Delhi may be charged once they exceed three transactions in a month at other bank ATMs.

 

The RBI revised these charges following requests from white-label ATM operators, who cited increasing operational expenses affecting their business models, as per DD News.

 

Increased Charges for ATM Transactions

 

Starting 1 May 2025, customers exceeding their free transaction limits will incur higher fees:

 

Smaller banks are expected to be the most affected, as they rely on larger financial institutions for ATM services and infrastructure.

 

The government continues to promote digital banking as a more cost-effective and convenient alternative to cash transactions. The increase in ATM withdrawal charges further encourages customers to shift towards digital payment methods such as UPI, mobile banking, WhatsApp banking, and internet banking. With these services becoming more mainstream, reliance on physical cash transactions is expected to decline.

 

According to an RBI circular from October 10, 2014, customers are entitled to a limited number of free ATM transactions each month at other bank ATMs. In metro cities such as Mumbai, Delhi, Chennai, Kolkata, Bengaluru, and Hyderabad, users are allowed three free transactions per month, covering both financial and non-financial transactions. In non-metro locations, the limit remains at five free transactions per month.

 

Technical failures often lead to failed ATM transactions, causing confusion among customers regarding charges. The RBI clarified in a circular dated 14 August 2019, that failed transactions due to hardware, software, communication issues, or lack of cash in the ATM will not be counted as valid ATM transactions. Consequently, customers will not be charged for such failed transactions.

 

Additionally, non-cash transactions such as balance inquiries, checkbook requests, tax payments, and fund transfers conducted at the issuing bank's ATMs (‘on-us’ transactions) will not be deducted from the free transaction limit.

With these revised fees coming into effect, customers may find digital banking a more viable and cost-efficient option compared to frequent ATM withdrawals.