The Reserve Bank of India (RBI) has approved an increase in ATM cash withdrawal charges, raising the transaction fee from ₹21 to ₹23 per transaction. The change will take effect from May 1, 2025. This decision aims to address rising operational costs for banks and ATM service providers. The RBI has also clarified that the ATM interchange fee, which banks pay each other for providing ATM services, will now be determined by the respective ATM networks.
Customers will still have access to a limited number of free transactions before incurring charges. According to the RBI, account holders can make up to five free ATM transactions, including financial and non-financial transactions, from their own bank’s ATMs each month. Additionally, customers can conduct three free transactions from ATMs of other banks in metro cities and five free transactions in non-metro areas. Once they exceed these limits, banks can charge a maximum fee of ₹23 per transaction.
Banks have been urging the RBI for a revision in ATM charges due to increased expenses related to ATM maintenance, security, and technology upgrades. The new hike is expected to help financial institutions recover operational costs while ensuring a sustainable ATM network across the country. The move follows a similar fee revision in 2021, when the RBI raised the transaction fee from ₹20 to ₹21.
The decision to increase ATM fees comes as digital payments continue to rise in India. However, cash transactions remain significant, particularly in rural and semi-urban areas where ATMs serve as the primary source of banking. Industry experts believe that while the fee hike may push more customers towards digital transactions, cash withdrawals will still play a crucial role in everyday financial activities.
State Bank of India (SBI), the country’s largest bank, earned ₹331 crore from ATM withdrawals in the financial year 2023-24. Other major banks have also reported substantial revenue from ATM fees. The latest revision in charges is likely to further increase earnings for banks, though it may also lead to some dissatisfaction among customers who rely heavily on cash withdrawals.
Several consumer rights groups have raised concerns over the frequent increase in ATM charges, arguing that it disproportionately affects those who depend on cash for their daily transactions. Many have urged banks to improve ATM services, ensure better cash availability, and reduce transaction failures before implementing higher fees.
Financial analysts believe that the RBI’s move aligns with global trends, where ATM withdrawal fees are adjusted periodically to reflect economic conditions and operational costs. Some also predict that the increase in charges may prompt customers to be more strategic in their cash withdrawals, opting to withdraw larger amounts less frequently to avoid multiple transaction fees.
Banks are now expected to inform customers about the revised charges well in advance of the implementation date. Many are likely to update their websites, mobile apps, and ATM screens to reflect the new fee structure. Meanwhile, fintech companies and digital payment platforms may see an opportunity to attract more users as customers explore alternatives to avoid increased ATM charges.
While the RBI has taken steps to balance the needs of banks and consumers, the long-term impact of this decision remains to be seen. With India’s financial landscape evolving rapidly, cash transactions continue to coexist with digital payments, making it crucial for banks to maintain a seamless and affordable ATM network. The increased fees may be a necessary adjustment, but ensuring customer satisfaction and accessibility should remain a priority for financial institutions.
Many banking experts argue that the increased ATM withdrawal fee is a response to inflationary pressures and rising operational costs. Banks have had to invest heavily in upgrading their ATM infrastructure, improving security measures, and ensuring compliance with regulatory guidelines. Additionally, cash management expenses, including transportation and replenishment of ATMs, have increased significantly. By raising transaction fees, banks hope to offset these costs while maintaining the availability of cash withdrawal services across urban and rural areas.
However, some analysts believe that this move could accelerate the shift toward digital transactions. With the growing popularity of UPI, mobile banking, and contactless payments, customers may reconsider their reliance on cash withdrawals. In recent years, India has seen a steady decline in cash usage for routine payments, with more people opting for digital alternatives. The revised ATM fees could further push this trend, especially among younger consumers and urban populations who already prefer digital wallets over cash.
Despite these advancements, a large section of the population still depends on cash transactions, particularly in small towns and rural areas where digital banking infrastructure is not as widespread. Many businesses, including local vendors and small retailers, still operate primarily in cash. The increased ATM charges could add a financial burden on these users, making it more expensive to access their own money. Some consumer groups have urged banks to consider waiving or reducing fees for economically weaker sections and pensioners who rely on cash for daily expenses.
Banks are also facing the challenge of maintaining ATM availability. In recent years, several private and public sector banks have shut down less profitable ATMs, citing high operational costs. The higher withdrawal fee could provide them with an incentive to sustain ATM operations in remote areas, ensuring continued access to banking services for underserved communities. However, financial inclusion advocates argue that rather than increasing charges, banks should focus on expanding their ATM networks and improving efficiency.
Another important aspect is the role of white-label ATMs—privately operated ATMs that are not affiliated with any particular bank. These ATMs play a crucial role in providing cash access in areas where traditional bank ATMs are limited. With the new fee structure, it remains to be seen how white-label ATM operators will adjust their pricing models and whether customers will see further changes in withdrawal charges.
While the RBI’s decision aims to strike a balance between cost recovery for banks and reasonable fees for customers, it has also sparked a debate about the future of cash transactions in India. Some experts suggest that instead of focusing on increasing ATM fees, the government and banks should work on improving financial literacy and encouraging digital adoption in rural areas. Making digital payments more accessible and secure could reduce dependence on cash withdrawals, ultimately minimizing the impact of rising ATM charges.
As the implementation date approaches, banks are expected to issue official communications to inform customers about the new charges. Many will likely emphasize the benefits of using digital banking services as an alternative to frequent ATM withdrawals. However, whether this move will significantly reduce cash dependency or simply increase banking costs for consumers remains a key question in India’s evolving financial ecosystem.