New Delhi: Withdrawing cash from ATMs in India will soon become more expensive, as the Reserve Bank of India (RBI) has approved an increase in ATM interchange fees, effective May 1.

This means that customers who frequently use ATMs will face additional charges once they exceed their free transaction limit.

An ATM interchange fee is the charge one bank pays to another for using its ATM services. Typically, this fee is a fixed amount per transaction and is often passed on to customers as part of their overall banking costs.

The RBI’s decision to increase these fees comes after white-label ATM operators requested the revision, citing rising operational costs that were affecting their business.

The fee hike will apply across the country and is expected to particularly impact customers of smaller banks.

These banks rely on larger financial institutions for ATM infrastructure and related services, making them more vulnerable to rising costs.

From May 1, customers will have to pay an additional Rs 2 for each financial transaction beyond the free limit.

For non-financial transactions, such as balance inquiries, the fee will increase by Rs 1. As a result, withdrawing cash from an ATM will cost Rs 19 per transaction, up from the earlier Rs 17.

Checking account balances will now cost Rs 7 per transaction, according to the official notification.

ATMs, once seen as a revolutionary banking service, have been struggling in India with the rise of digital payments.

The convenience of online wallets and UPI transactions has significantly reduced the need for cash withdrawals.

Government data shows that digital payments in India were valued at Rs 952 lakh crore in FY14. By FY23, this figure had jumped to Rs 3,658 lakh crore, reflecting a massive shift towards cashless transactions.

With this new fee hike, customers who still rely on cash transactions may feel the burden, further pushing them toward digital alternatives. IANS