ATM interchange fee hike puts spotlight on micro-ATMs, financial inclusion

The gap of nearly Rs 4 could affect the business correspondent network, which derives nearly 40 per cent of its revenue from the micro-ATM network

The National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI) last week announced an increase in ATM interchange fee for cash withdrawals from Rs 17 to Rs 19, effective May 1, 2025. However, the pricing of micro-ATM transactions has not been increased, and stays at the earlier level of half-a-per cent of the ticket size or Rs 15, whichever is lower, raising questions about the continued viability of the business correspondents (BC) network, which typically uses the facility. 

Effectively, the gap between the ATM interchange for cash withdrawa ls over micro-ATM pricing has now increased to Rs 4.

“The pricing on micro-ATMs transactions (or the Aadhaar-enabled Payment System) must be aligned with that on legacy ATMs”, said Anand Bajaj, founder-managing director and chief executive officer, PayNearby, which partners with kirana stores and provides assisted financial and digital commerce services to local communities via BCs. 

According to RBI data (Payment System Indicators January 2025), the volume of micro-ATM transactions stood at 915.09 lakh with a combined value of Rs 23,246 trillion in January 2025. In comparison, there were 4,910.07 lakh ATM transactions (including those on cash recyclers in which you can both withdraw and deposit cash) with a total value of Rs 2,51,938 trillion. The number of ATMs and micro-ATMs were at 2.57 lakh and 14.64 lakh units, respectively. Effectively, micro-ATMs outnumber regular ATMs by an almost 7:1 ratio, reflecting their much-wider reach. 

The demand to align the pricing of micro-ATM with legacy ATMs stems from the fact that it places the former on a lower viability footing. This is because “cash-in, cash out” or CICO continues to be the revenue mainstay of almost 40 per cent of the BC business which, in turn, is critical to financial inclusion. 

BCs recently raised concerns about the viability of the nearly two-decades-old channel with the Ministry of Finance, warning that it is becoming increasingly unfeasible to continue operations. In November last year, the Business Correspondent Resource Council had raised the issue during a meeting with the Minister of State for Finance Pankaj Chaudhary. The meeting revisited the aspects highlighted by the working group set up under the chairmanship of C S Setty, which submitted its report in December 2022. Setty, currently chairman of State Bank of India was the bank’s managing director at the time. 

Hiking ATM interchange or pricing on micro-ATMs transactions is a sensitive subject given its impact on retail customers. The interchange is the pay-out by a card-issuing bank when you swipe at other banks’ ATMs, including on white-label ATMs (WLATMs). Before the latest revision, the interchange had been raised to Rs 17 from Rs 15 (and to Rs 6 from Rs 5 for non-financial transactions), effective August 1, 2021. But the current interchange at Rs 19 is only a rupee higher than the Rs 18 in 2012 before it was cut to Rs 15. Over this period, ATM costs have gone up because of rentals on ATM premises, cash-loading charges, and adhering to the Ministry of Home of Affairs security protocols by cash logistics firms. 

In the case of the pricing on micro-ATMs, a hike would lead to a larger payout by banks to BCs which are used for last-mile financial inclusion, typically in rural areas or those that don't have easy access to banking infrastructure. The flipside is that keeping it current levels adversely affects BCs, who have also seen their costs spiral. This, even as it is proving tough to retain boots on the ground considering better remuneration offered by the likes of e-commerce platforms such as Swiggy and Blinkit.

 

ATMs vs micro-ATMs 

While the interchange for ATM cash withdrawals has been hiked to Rs 19 from Rs 17, pricing on micro-ATMs transactions continues to be at half-a-per cent of the ticket size or Rs 15, whichever is lower, leading to a gap of Rs 4

The demand to align the pricing structures is because at 40 per cent, “cash-in, cash out” (CICO) continues to be the revenue mainstay of a BC’s business

RBI data (shows the volume of micro-ATM transactions at 915.09 lakh with a value of Rs 23,246 trillion in January 2025. In comparison, there were 4,910.07 lakh ATM transactions with a value of Rs 2,51,938 trillion.