Last week, the Reserve Bank of India (RBI) allowed banks to increase the fees they charge to customers for using the Automated Teller Machines (ATMs) or cash vending machines by Rs 2 to Rs 23 per transaction above the currently permissible limits.
The new charges will be effective from May 1. The fee revision follows requests from white-label/standalone/non-bank ATM operators, who sought higher withdrawal charges due to increasing operational costs affecting their business.
Called ATM interchange fee, all ATM transactions are charged to the respective banks for offering services to customers. Banks typically pass this cost on to customers.
For instance, while SBI, which has the largest branch and ATM networks, makes huge profit from such interchange charges— the latest number is around Rs 380 crore— most others like Bank of Baroda book the maximum losses among public sector banks.
Most of the large private banks also make money from their ATM operations, while small private sector banks and their customers will be most impacted as they depend heavily on other banks for this purpose.
Cash transactions have come down massively with the increased adoption of UPI payments and other digital payments, especially in cities.
The interchange charges when introduced a decade ago was Rs 17, which was increased to Rs 19 and then Rs 21, a few years ago.
On a positive side, the frequent increases in the fees can give an additional push to the digital transactions which was clear from the government move to continue to fund the industry in preventing them from passing on the merchant discount rates to UPI customers by allocating Rs 1,500 crore so that the industry makes some money.
Digital transactions like UPI/BHIM, mobile banking, WhatsApp banking, and internet banking — will become more attractive for consumers. How can one avoid paying higher ATM fees?
The simplest is to withdraw a higher amount, say the entire amount you need to withdraw for a month.
Another way is to switch to a bank that reimburses ATM fees. Another option is to opt for digital payment methods instead of frequent cash withdrawals.
If you aren’t comfortable with online payments and have to depend on cash, a way out is to stick to in-network ATMs- use the machines that are owned by your bank where you have an account.
These ATMs are typically free to use, while using out-of-network ATMs can incur fees from both your bank and the ATM owner.
Choose banks that reimburse the ATM fees: Some banks offer ATM fee reimbursement, either up to a certain amount per month or for premium accounts that cover all ATM fees.
Go digital: Reduce your reliance on ATMs by using digital payment methods like UPI, net banking, or mobile banking for purchases and bill payments.
This can help you avoid ATM withdrawals and the associated fees.
Swipe your debit card instead of cash withdrawals: In many cases, you can pay for purchases using your debit card instead of withdrawing cash from an ATM. This can help you avoid ATM fees and potentially save time.