ATM withdrawals to get costlier from 1 May 2025: Here is what you need to know

CHENNAI: In a major development that will affect crores of bank account holders, the Reserve Bank of India (RBI) has approved a hike in the fees charged for ATM withdrawals after crossing the free monthly usage limit.

From May 1, 2025 onward, ATM users will have to pay Rs 23 per transaction for every withdrawal that crosses the established limit, a hike of Rs 2 from the existing Rs 21 fee.

Here is what you need to know:

Fee hike: The charge for ATM withdrawals that go over the free limit will increase by Rs 2 — from Rs 21 to Rs 23 from the first of May. This is for both domestic and out-of-network ATMs.

Free transactions: Customers are eligible for 5 free monthly transactions (financial and non-financial) from their own bank's Automated Teller Machines (ATMs) every month.

From other bank ATMs, 3 transactions in metro centres and 5 in non-metro centres are allowed every month.

If a transaction is made above this prescribed limit, you will be charged Rs 23.

Applicability: The RBI's circular applies to all commercial banks, including Regional Rural Banks (RRBs), co-operative banks, authorised ATM network operators, card payment network operators, and white label ATM operators.

ATM interchange fee: This is the charge one bank pays to another bank when a customer of the first bank uses an ATM belonging to the second bank. This fee will be as decided by the ATM network.

Current interchange fee per transaction is Rs 17 for financial transactions and Rs 6 for non-financial transactions in all centres.

Reason for the hike: The hike is mainly to account for the increasing costs of maintaining and replacing ATM infrastructure with banks looking to offset the rising operational expenses related to ATM networks, such as technology enhancement and security.

The RBI action can also be viewed in the context of a larger attempt at making a more digitalised banking system, prompting more people to shift to fee-less cash alternatives such as mobile banking apps and digital wallets. This aligns with the government's policy to decrease cash dependence, particularly in the context of the COVID-19 pandemic, which led to a major increase in digital and contactless payments.

What does this mean for customers?

The additional charges are likely to affect customers who use ATMs frequently, especially those in rural and semi-urban regions where the usage of bank branch ATMs might be limited. These customers are likely to end up paying the Rs 23 fee more regularly, as they would probably be forced to use third-party network ATMs.

To suburban residents, the effect may not be as big since numerous residents already receive access to multiple ATMs belonging to their bank's network, which reduces the likelihood of incurring the higher charge.

The hike can still affect people who routinely make more withdrawals above the free limit, particularly if it involves processing small amounts of money.

Public opinion and criticism

The RBI’s decision has already sparked mixed reactions among consumers. While many recognise that the rising costs of ATM services must be met, others are critical of the fee hikes, arguing that they disproportionately affect lower-income individuals who continue to depend on cash withdrawals.

Critics have also raised that the continued drive towards digital banking will further deter the use of physical cash, particularly from rural communities who are less likely to own smartphones or have constant internet connectivity.

Customers will have to be more cautious with their withdrawals, and banks will have to increase efforts to inform their customers about other methods of making transactions more efficiently.

Meanwhile, Tamil Nadu Chief Minister MK Stalin criticised the hike in a social media post. He said the government urged everyone to open bank accounts and then came demonetisation, pitching digital India. Going on to ask, "What followed? Charges on digital transactions, penalties for low balances and now the RBI has allowed banks to charge up to Rs 23 for ATM withdrawals beyond the monthly limit. This will make people withdraw more than they need and in particular, negate the objectives of financial inclusion of the poor,” Stalin argued.