Cash withdrawals at ATMs are set to become more expensive from May 1, following the Reserve Bank of India’s (RBI) decision to approve an increase in ATM interchange fees — a move that’s expected to impact millions of bank customers across the country. According to reports from The Financial Express, the RBI has sanctioned a ₹2 hike in fees for financial transactions and a ₹1 increase for non-financial ones. This means that cash withdrawals from ATMs will now cost ₹19 per transaction, up from the current ₹17, while non-financial transactions like balance inquiries will rise to ₹7 from ₹6.
This fee hike is particularly significant for customers who frequently use ATMs belonging to banks other than their own. Under the current structure, customers typically receive a limited number of free transactions — five per month in metro cities and three per month in non-metro areas. Once this limit is exceeded, banks start charging fees for each additional transaction. With the new rates, those extra transactions are about to get noticeably more expensive.
What is an ATM Interchange Fee?
To understand the change better, let’s break down the concept of ATM interchange fees. An ATM interchange fee is the charge one bank pays to another bank when a customer uses an ATM that doesn’t belong to their own bank’s network. For instance, if a customer holding an account with Bank A withdraws cash from an ATM owned by Bank B, Bank A has to compensate Bank B for providing that service. This cost is then passed on to the customer as a transaction fee — but only after they exhaust their free transaction limit for the month.
The recent revision in fees comes after extensive lobbying from white-label ATM operators — independent companies that set up ATMs under a non-bank brand — and banks. They argued that the previous fee structure wasn’t enough to cover rising operational costs, including cash handling, security, machine maintenance, and software upgrades. The National Payments Corporation of India (NPCI) supported the proposal, acknowledging that higher costs have strained ATM operators, particularly in rural and semi-urban areas where transaction volumes tend to be lower, making operations less profitable.
How Will This Impact Customers?
For customers who rely on ATMs frequently, especially those who use ATMs from banks other than their own, this hike could lead to significantly higher monthly banking costs. For example, if a person withdraws cash from a non-home bank ATM eight times a month in a metro city, the first five transactions would remain free — but the next three would now cost ₹19 each, totaling ₹57, compared to the earlier ₹51. Similarly, checking balances, changing PINs, or requesting mini statements beyond the free limit will now cost ₹7 per inquiry, adding to the overall expense of basic banking services.
The effect of this hike may be even more pronounced in rural areas, where people often rely on ATMs from other banks due to the lower number of machines available nearby. Additionally, this move could push more customers toward digital banking options like UPI, mobile wallets, and net banking to avoid higher ATM fees — a shift that aligns with the government’s ongoing efforts to promote a cashless economy.
However, the transition to digital payments isn’t always seamless, particularly for the elderly and people in areas with poor internet connectivity. Many of these individuals still prefer cash transactions and depend on ATMs to access their money. For such users, the fee hike may feel like an additional burden on their daily expenses, especially when combined with rising costs of other essential services.
Why Are ATM Fees Increasing?
Banks and ATM operators argue that this fee increase is essential to ensure ATMs remain operational and financially viable. Over the past few years, many ATM machines — especially in rural and remote areas — have shut down due to high maintenance costs and low transaction volumes. White-label operators face even greater challenges, as they don’t earn directly from customers’ accounts like traditional banks do. Their revenue relies primarily on interchange fees, which, until now, hadn’t been revised enough to reflect inflation and the rising costs of running an ATM network.
Security costs have also increased, particularly with the growing risk of ATM fraud, vandalism, and physical theft of cash from machines. Upgrading to more secure, tamper-proof machines — equipped with advanced technology like biometric scanners and cardless withdrawals — further adds to the expenses. The fee hike is intended to help banks and ATM operators recover these rising operational costs and continue expanding ATM availability, particularly in underserved regions.
Potential Changes in Banking Strategies
With the new fee structure, banks might also explore offering premium account packages that provide higher limits on free ATM transactions to attract and retain customers. Some banks may introduce personalized offers or reward programs, where customers can earn additional free ATM withdrawals based on their account balance, transaction history, or usage of other digital banking services.
Moreover, this fee hike could encourage banks to accelerate innovations in the ATM space — such as biometric authentication, facial recognition, and contactless cash withdrawals — making the experience faster, safer, and more convenient for customers.
For now, though, the immediate reality is that regular ATM users — particularly those relying on non-home bank ATMs — will face higher costs for their transactions. Whether this move ultimately leads to better ATM infrastructure or simply increases the financial burden on customers remains to be seen.
