Increase in ATM Interchange Fee Approved by NPCI and RBI
In a significant development for the banking and financial sector, the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI) have approved an increase in the ATM interchange fee for cash withdrawals. This new fee structure, which raises the current fee from Rs 17 to Rs 19, is set to take effect on May 1, 2025. The decision reflects the evolving landscape of domestic financial transactions and the need for an updated fee mechanism in the ATM network.
Revised Fees for Transactions
The interchange fee increase applies specifically to domestic financial and non-financial transactions. According to a circular released by the NPCI on March 13, non-financial transactions will now incur an interchange fee of Rs 7. This new fee structure will be applicable across the vast network of ATMs associated with the National Financial Switch (NFS), a crucial component of India’s digital payment infrastructure.
A separate goods and services tax (GST) will be levied on the interchange fee, impacting the overall cost for financial institutions and their customers.
Approval Process Explained
The NPCI had formally requested the RBI to approve the revised fee structure. In response, the RBI issued a letter on March 11, 2025, indicating that the authority to decide on ATM interchange fees rests with the ATM network operators. In line with this, the NPCI has been instructed to communicate the effective date for the revised fee directly to the RBI.
Importantly, the new interchange fees will not apply to micro-ATMs, interoperable cash deposit transactions (both card-based and UPI-based), and international ATM transactions. These services will continue to operate under the existing fee framework, ensuring that essential services remain accessible without additional charges.
Additional Details
For balance inquiry transactions conducted in Nepal and Bhutan, the interchange fee is fixed at Rs 7, excluding GST. This revision is aimed at standardizing transaction costs across different service areas.
As of the latest data, the number of members within the NFS has risen to 1,349, an increase from 1,296 in February of the previous year. However, the volume of transactions approved by NFS has seen a decline, with reported transactions at 315 million in February 2025, down 13.7% from 365 million in February 2024. Despite these fluctuations, the total number of ATMs within the NFS network has remained steady at approximately 2.65 lakh, maintaining a consistent presence in the landscape of cash withdrawals.
Conclusion
The decision by NPCI and RBI to increase the ATM interchange fee marks a pivotal step in adapting to the changing dynamics of financial transactions in India. As these changes take effect in May 2025, stakeholders, including banks and customers, will need to adjust to the new fee structure, which aims to ensure the sustainability and efficiency of the nation’s ATM network.
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