The Reserve Bank of India (RBI) has increased the interchange fee that banks can levy on automated teller machine (ATM) transactions to Rs17 per financial transaction.
ATM interchange is the charged by the bank that issues the card to the bank where it is used to withdraw cash.
While the card-issuing bank is called the issuer, the one that pays the charge is called an acquirer. This charge between the acquirer and the company maintaining the ATM is different, which is why banks don’t promote the practice of using ATMs of other banks.
The interchange for non-financial transactions has been now been increased to inflated to Rs 6, from Rs 5 earlier, with effect from 1 August.
In June 2019, RBI had set-up a committee under the chairmanship of V.G. Kannan, the then CEO of Indian Banks’ Association (IBA), to review ATM charges. The recommendations of the committee were announced in July 2020.
Back then, the committee had recommended a hike in free transactions at ATMs in all centres with population of less than 1 million, according to Census 2011 and to be reviewed on regular intervals. For centres with higher population, it had suggested retaining the free transaction limit at three.
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Besides, it also recommended that for ATMs in centres with population of 1 million and above, the interchange fee should be hiked by Rs 2 to Rs 17 for financial transactions and to Rs 7 for non-financial transactions.
“The recommendations of the committee have been comprehensively examined. It is also observed that the last change in interchange fee structure for ATM transactions was in August 2012, while the charges payable by customers were last revised in August 2014,” RBI said on Thursday.
RBI also stated that the customers are eligible to perform five free transactions, inclusive of financial and non-financial transactions, every month from their own bank ATMs.