The Reserve Bank of India (RBI) has approved an increase in ATM interchange fees, effective May 1. The revised fees will see a 12% increase in the fee for financial transactions, such as cash withdrawals, and a 16.7% increase for non-financial transactions, like balance enquiries. The increased fees will be paid to other banks when their customers use ATMs of another bank. While banks have not yet decided whether to pass on the increased fees to customers, experts believe that customers will ultimately bear the brunt.
The RBI previously revised interchange fees in June 2021, and the current increase is expected to have a greater impact on smaller banks with limited ATM networks. The increase in interchange fees was requested by white-label ATM operators, who were finding it difficult to operate under the current fee structure. While the RBI has approved the increase, it is now up to banks to decide whether to pass it on to their customers.
The increased interchange fees may lead to a significant payout from small banks to other banks, making it a challenging situation for banks with limited ATM networks. If small banks absorb the increase, it will hurt their profitability, while passing it on to customers will upset them. As a result, customers may see increased fees for their ATM transactions in the coming months.