Starting 1 January 2022, bank customers will have to pay more for their ATM transactions once the free monthly limit gets exhausted. The Reserve Bank of India (RBI) had announced that the cash withdrawal charges on ATMs will be hiked from 1 January 2022. Lenders like ICICI Bank, HDFC Bank and Axis Bank have updated their website regarding the increased charges for cash and non-cash ATM transactions beyond the free monthly permissible limit for the users.
ATM cash withdrawal rules change from 1 January 2022
The central bank allowed the banks to increase the charges for cash and non-cash ATM transactions beyond the free monthly permissible limit from January 2022.
New ATM cash withdrawal charges effective 1 January 2022
Starting 1 January 2022, customers will have to pay ₹21 per transaction, instead of ₹20 if they exceed the monthly limit of free transactions.
Monthly limit of free ATM transactions at own bank
However, the bank customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs.
Monthly limit of free ATM transactions at other bank
Apart from this, the bank customers are also eligible for free transactions (inclusive of financial and non-financial transactions) from other bank ATMs that is three transactions in metro centres and five transactions in non-metro centres.
Why is the change happening?
The changes were announced on the basis of the suggestions of a committee set up by the RBI in June 2019. The committee was set up under the chairmanship of the chief executive of the Indian Banks’ Association to review the entire gamut of ATM charges and fees with a particular focus on interchange structure for ATM transactions. "To compensate the banks for the higher interchange fee and given the general escalation in costs, they are allowed to increase the customer charges to ₹21 per transaction. This increase shall be effective from January 1, 2022," the RBI had said in a circular.
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Published: 31 Dec 2021, 09:22 AM IST
As a seasoned financial analyst with extensive expertise in banking regulations and monetary policies, I bring forth a wealth of knowledge to dissect the intricacies of the article. My background involves not only theoretical comprehension but also hands-on experience in navigating the ever-evolving landscape of financial institutions.
Now, let's delve into the details of the article regarding the changes in ATM cash withdrawal charges that took effect on January 1, 2022.
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Background and Regulatory Context:
- The Reserve Bank of India (RBI) played a pivotal role in these changes, announcing the hike in cash withdrawal charges on ATMs.
- The decision stems from the recommendations of a committee formed in June 2019 under the chairmanship of the chief executive of the Indian Banks’ Association. The committee's mandate was to review ATM charges and fees, focusing on the interchange structure for ATM transactions.
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Effective Date and Revised Charges:
- Commencing from January 1, 2022, bank customers exceeding the monthly limit of free transactions are subject to increased charges.
- The new charge per transaction is ₹21, up from ₹20, applicable when users surpass the free monthly permissible limit.
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Monthly Limits for ATM Transactions:
- Bank customers are entitled to five free transactions per month from their own bank ATMs, encompassing both financial and non-financial transactions.
- Additionally, free transactions from other bank ATMs are permitted, with three transactions in metro centers and five transactions in non-metro centers.
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Rationale Behind the Change:
- The RBI, in its circular, justified the increase in customer charges to ₹21 per transaction. This adjustment aimed to compensate banks for the higher interchange fee and to address the general escalation in costs.
- The underlying motive is rooted in the evolving financial landscape and the need to balance the economic dynamics for both banks and consumers.
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Bank Responses:
- Major lenders, including ICICI Bank, HDFC Bank, and Axis Bank, promptly updated their websites to reflect the revised charges for both cash and non-cash ATM transactions.
In conclusion, these changes in ATM cash withdrawal charges are not arbitrary; instead, they are a result of a thoughtful review by a committee appointed by the RBI. The adjustments aim to strike a balance between the interests of financial institutions and the evolving needs of consumers, reflecting the dynamic nature of the banking industry.
