ATM Transaction Fee: Cash Withdrawals Likely To Become Expensive Soon - Check Details

Credit card and debit card users may soon have to spend more money to use the cash withdrawal facility at Automated Teller Machines (ATMs). The Reserve Bank of India (RBI) is mulling a hike in the maximum fee which banks can charge for cash transactions beyond the free transaction limit, according to a report by Hindu Businessline which cited sources privy to the matter.

The rise of technology has enhanced the way people conduct transactions. Technological advancements such as digitisation payments have reduced the dependence people have on using cash for transactions. However cash is still preferred by a major part of the population for conducting transactions, thus the fee hike is likely to impact many people.

The business daily said in its report that the National Payments Corporation of India (NPCI), has recommended that the cash transaction fee should be increased from Rs 21 to Rs 22 per transaction. However, the customers will still get up to five free transactions before the fee is charged.

As per the report, the NPCI also recommended that the ATM interchange fee should be increased from Rs 17 to Rs 19 for cash transactions. Other proposals include a fee hike from Rs 6 to Rs 7 for non-cash transactions. Interchange fee refers to the amount of money a bank has to pay another bank when a customer uses the debit card or credit card of one bank with the ATM machine of another bank.

Lending institutions and ATM companies were on board with the recommendation to hike the interchange fee for metro areas. However, they suggested that the intercharge fee should be hiked to Rs 21 per cash transaction and Rs 7 for non-cash transactions for non-metro areas.

Presently lending institutions can charge up to Rs 21 per ATM cash transaction after a customer exhausts the five free transaction limit per month in non-metro areas and three free cash transactions limit in metropolitan cities such as Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, and New Delhi.

“The RBI formed a second committee under the chairmanship of IBA CEO, officials from SBI and HDFC Bank. After assessing the cost for both private and public sector banks, we made a recommendation in September last year. We said while NPCI’s recommendation can be kept (for metro areas), the real issue is in rural and semi-urban areas,” the source told Hindu Businessline.