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RBI New Rules on ATM Withdrawals: ₹23 Fee, ₹19 Interchange Charge – What to Expect

 

Starting May 1, 2025, withdrawing cash from ATMs will become an expensive activity in India, as per a new announcement made by the Reserve Bank of India (RBI) regarding ATMs. The RBI has, therefore, increased the charges for transactions beyond the free monthly limit. By this, all customers exceeding the limit will now have to shell out Rs 23 per transaction as compared to the older value of Rs 21. This increase applies to all bank ATMs, even including cash recycler machines.

 

Higher Fees and Limited Free Transactions

 

Banks grant each of their customers a specific number of free ATM transactions per month. Above this number, there is a paid fee.

 

The revised structure remains unaffected as far as free transactions are concerned:

 

  • Five free withdrawals per month at the ATMs of one’s own bank.

  • Three free transactions at other banks' ATMs in metro areas.

  • Five free transactions at other banks' ATMs in non-metro areas.

Beyond these limits, the increased Rs 23 charge will apply. This fee is applicable even for cash withdrawals from cash recycler machines; however, deposits are exempted.

 

Why the Fee Hike

 

According to the RBI's argument, the increase in operational costs of ATM maintenance, cash replenishment, and security upgrades when managing them warranted the revision in fees. The last fee hike happened in 2021, although operational costs have been escalating since, banks have now resorted to raising transaction fees to recover those costs.

 

Impact on Customers and Shift to Digitalization

 

The frequent user would probably plan withdrawals in advance since the frequent withdrawal would mean increased costs incurred. This likely makes withdrawing little amounts of cash at a time become less viable, which may push for a shift to digital alternatives. Banks are talking about the use of UPI, mobile wallets, and internet banking as the mode of transferring money rather than withdrawing cash.

 

ATM Interchange Fee Also Increased

 

In addition to the withdrawal fees, the other increase was that of the interchange fee-too-fees banks pay to one another for ATM transactions. Hence, the new rates are Rs 19 for cash withdrawals and Rs 7 for non-financial transactions. Such a development is likely to affect how banks run their ATM networks and with the white-label ATM operators.

 

Mixed Reactions to the Announcement

 

Tariff hike has turned into a subject of debate with consumer collectives. Some argue that such hikes are unavoidable due to rising operational costs, while others call them burdensome for a cash-dominated lifestyle, as it only increases the cost of cash transactions. Additionally, there is some concern about the purported fallout of this increase on financial inclusion, especially among the rural and semi-urban populace, which generally stands dependent on cash withdrawal.

This is yet another sign that the banks are moving toward the cashless economy as digital payments continue to be adopted at a growing rate. However, withdrawal habits may need adjustments for those still attached to the ATMs so as not to incur additional costs.