The interchange fee is what one bank pays another when its debit card is used at the latter’s ATM. The installed ATM base in the country stands at around 265,000.
Industry sources said the issue is set to be taken up by the National Payments Corporation of India (NPCI). This follows deliberations between the Reserve Bank of India (RBI) and the Confederation of ATM Industry (CATMi).
A senior CATMi official told Business Standard, on condition of anonymity, that: “The interchange has to reflect costs as they stand. One way is to have this aligned to the WPI and another is to have it reflect the size of the cash-pullout.”
At present, the interchange fee is the same whether a customer withdraws ₹5,000 or ₹10,000 (the maximum amount permitted per transaction).
There could also be a revisit of the pricing after a customer exhausts the free transaction limit set by the card-issuing bank. Currently, customers are entitled to three free transactions at other banks’ ATMs in metros and five in non-metros. Beyond this limit, a customer pays ₹23.
K Srinivas, director at CATMi and vice-chairman of India1, the largest white-label ATM player, told Business Standard that the issue of linking the interchange to the WPI had been taken up with the banking regulator and NPCI. “We hope to see a positive response.”
The Committee to Review ATM Interchange Fee Structure, set up in 2019 and headed by former Indian Banks’ Association chief executive officer V G Kannan, had recommended a periodic review of interchange and ATM usage charges at intervals to be decided by Mint Road.
A periodic reset of ATM interchange has been a long standing issue, with only three hikes since 2011. The latest increase – up by ₹2 to ₹19 effective May 1 last year — followed an earlier hike to ₹17 from August 1, 2021. Before that, the interchange fee had remained unchanged at ₹15 for nearly a decade.
The argument against a hike is that banks save costs when they push business to the ATM and digital channels from branches. The flip side is both are not cheap and you have to account for investments in technology.
For ATMs specifically, higher operating costs stem from lease rentals, power charges, and cash-loading charges. The latter is set to go up exponentially with the West Asia crisis leading to higher fuel prices, which cash-in-transit firms (which move cash to load it into ATMs) have to pencil in.
Another aspect is the move to withdraw the ₹2,000 denomination note and the RBI directive to increase the availability of more banknotes below ₹500. This has meant more trips to load ATMs with cash. While deployment of ‘recyclers’ (ATM machines that allow both withdrawal and deposits) is increasing, the higher capital expenditure on such units has raised channel costs.
Incidentally, the total value of ₹2,000 banknotes in circulation, which stood at ₹3.56 trillion as on May 19, 2023 (when the withdrawal of ₹2,000 banknotes was announced) has fallen to ₹5,451 crore by April 30. This means 98.47 per cent of the denomination in circulation (as on May 19, 2023) has been returned. The ₹2,000 notes, however, continue to remain legal tender.
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ATM costs of lease rentals, power and cash loading are rising, especially due to higher fuel prices amid the West Asia crisis
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The interchange fee was raised to ₹19 last year after moving to ₹17 in 2021 from ₹15, where it had remained for nearly a decade
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Withdrawal of ₹2,000 notes has increased ATM cash-loading trips, while higher-cost “recyclers” are adding to channel expenses
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The 2019 committee on ATM interchange had recommended periodic reviews of interchange and usage charges
 "Automated Teller Machine (ATM)")