From May 2025, Expect Higher ATM Charges on Withdrawals & Inquiries
From May 2025, Expect Higher ATM Charges on Withdrawals & Inquiries
The fee increase is expected to have a larger impact on smaller banks, especially those with limited ATM infrastructure.
The Reserve Bank of India (RBI) has approved an increase in ATM interchange fees, which will take effect from May 1, 2025. Under the revised structure, fees for financial transactions (such as cash withdrawals) will rise by Rs 2, while non-financial transactions (like balance inquiries) will see a Rs 1 increase. Smaller banks are expected to be more affected by this change due to their limited ATM networks.
Will Customers Bear the Extra Costs?
Although banks have not yet confirmed whether they will pass the increased fees onto customers, industry experts believe it’s likely. A senior banking official told The Financial Express, “Whenever interchange fees have been revised in the past decade, banks have always transferred the increased costs to customers. This time won’t be any different.”
Interchange fees are the charges one bank pays to another when a customer uses an ATM that isn’t operated by their home bank. These costs are often factored into customer service fees. The last fee revision took place in June 2021.
Under the new fee structure:
Financial transactions such as cash withdrawals will now be charged Rs 19, up from Rs 17.
Non-financial transactions like balance inquiries will cost Rs 7, compared to the previous rate of Rs 6.
Effects on Smaller Banks
The fee increase is expected to have a larger impact on smaller banks, especially those with limited ATM infrastructure. On March 13, 2025, the National Payments Corporation of India (NPCI) notified banks about the approved fee hike. This decision was driven by requests from white-label ATM operators, who were facing operational challenges under the previous fee structure.
Currently, customers in metro areas can make five free transactions per month at ATMs of other banks, while those in non-metro areas are allowed three free transactions. However, the increased interchange fees will raise the amount smaller banks need to pay to other banks when their customers use ATMs outside their network.
A senior official from a mid-sized private bank noted that the additional payouts due to the higher fees could be significant for smaller banks. These banks now face a tough decision: passing the increased costs onto customers may lead to dissatisfaction, but absorbing the fees themselves could hurt profitability.
