Starting from May 1, the Reserve Bank of India (RBI) authorized higher fees for ATM interchange operations. Financial transaction charges will rise by Rs 2, while non-financial transaction fees will increase by Re 1 following the revision. These adjustments will more heavily impact smaller banks that maintain restricted ATM networks.
Interchange fee increases from the RBI will significantly impact financial institutions on a smaller scale. Due to their limited number of ATMs, smaller banks will face the full impact of higher charges imposed through this fee increase. Introducing the new fee structure creates additional financial burdens for small banks that cannot distribute the costs like larger institutions.
The banking sector has not disclosed its plans regarding the potential transfer of fees to account holders. Evidence indicates that banks increase customer charges after fee revisions. An executive position holder within the banking sector confirmed that banks would shift the expenses to their user base as an inevitable cost increase. Casual ATM users planning to withdraw money will likely experience increased fees from the upcoming fee adjustment.
According to the new fee structure, Bank customers will notice price changes in financial and non-financial ATM transactions. The struggling financial sector involves a rise in interchange fees, which will increase from Rs 17 to Rs 19 for handling purchases made by cash through ATMs. The fee adjustment affects non-financial actions such as balance checking and raises them from Rs 6 to Rs 7. These adjustment rates will go into effect for exchanges between ATMs operated by different banking institutions.
The elevated interchange fee represents the payment between different banks they make for ATM service utilization. The financial institutions include this fee in customers' overall expenses during their transactions. Under the new fee framework, banks need to modify their systems because ATM users will experience consequences from these changes. The adjustments implemented by banks will lead to possible changes in the availability of particular customer services.
The National Payments Corporation of India (NPCI) requested the fee hike, which prompted the central bank to approve it to manage ATM infrastructure. In March, NPCI sent a formal request to all banks and their other stakeholders regarding this matter. RBI's official approval formalizes how these adjustments will come into force. The Reserve Bank of India implemented the second fee adjustment for interchange in June 2021 since it performed a similar adjustment in 2021.
The banking sector views charge adjustment as essential to sustaining the financial stability of the ATM network. The resulting operational cost increase will affect banks with limited ATM locations. ATM users seeking fundamental banking services through these devices are expected to perceive these adjustments.