. The new charges will take effect from May 1.){kind=link}
The Reserve Bank of India (RBI) has approved ‘Hike’ in the ATM interchange Fees. The hike is part of an RBI-approved revision based on a proposal by the National Payments Corporation of India (NPCI). The new charges will take effect from May 1.
RBI has approved an increase in ATM interchange fees. According to reports, the Central Bank has agreed on raising the fee by Rs 2 for financial transactions and Re 1 for non-financial transactions.
What is an ATM interchange fee?
There is nothing free in the financial services industry. Every time a customer of a particular bank uses an ATM of another bank for any transaction – be it financial or non-financial – the former bank has to pay a fee to the other bank. This fee, usually a fixed amount per transaction, is called an ATM interchange fee.
What will the new fee be: The new fee after this hike will be as follows:
- For financial transactions i.e. cash withdrawal:Â It will be increased from Rs 17 to Rs 19 per transaction.
- For non-financial transactions i.e. balance inquiries and other such things: It will be raised to Rs 7 per transaction from the existing Rs 6.
Will this move impact customers?
The bank often passes on this fee to customers as part of their banking costs. While there is nothing clear yet on whether this fee hike will be passed to customers or not.
The hike is part of an RBI-approved revision based on a proposal by the National Payments Corporation of India (NPCI).
The hike in the ATM interchange fees comes in the backdrop of white-label ATM players and banks lobbying for the revision. These players said the current fees were too low to keep their business profitable.
Will it increase digital payments?
ATMs, once considered a game-changer, have witnessed a dip in the footfall following the widespread adoption of Unified Payments Interface (UPI).
The surge in digital payment, especially after the coronavirus pandemic, has significantly reduced the dependency on ATMs as people can transfer money, check their balance and do several other things using their smartphones.
According to government data, India’s digital payments surged from Rs 952 lakh crore in FY14 to Rs 3,658 lakh crore in FY23.
National Payments Corporation of India (NPCI), an umbrella organization for operating retail payments and settlement systems in India, is an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.
Considering the utility nature of the objects of NPCI, it has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of the Companies Act 1956 (now Section 8 of the Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.
The company is focused on bringing innovations to retail payment systems through the use of technology to achieve greater efficiency in operations and widen the reach of payment systems.
The ten core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank Limited, HDFC Bank Limited, Citibank N. A. and HSBC. In 2016, the shareholding was broad-based to 56 member banks, including more banks representing all sectors.
In 2020, new entities regulated by RBI were introduced, consisting of payment service operators, payment banks, small finance banks, etc. The shares were allotted pursuant to the issuance of equity shares on a private placement basis in compliance with the applicable provisions of the Companies Act 2013.
NPCI, during its journey, has made a significant impact on the retail payment systems in the country. Dedicated to the nation by former President, Shri Pranab Mukherjee, endorsed by the Hon’ble Prime Minister, Shri Narendra Modi and later made the card of choice for the ambitious Pradhan Mantri Jan Dhan Yojana, RuPay is now a known name. RuPay is an Indigenously developed Payment System – designed to meet the expectation and needs of the Indian consumer, banks and merchant eco-system.
With Immediate Payment Service (IMPS), India has become the leading country in the world in real-time payments in the retail sector. National Automated Clearing House (NACH) is an offline web-based system for bulk push and pull transactions. The Aadhaar Payment Bridge (APB) System is helping the government and government agencies make direct benefit transfers for various central and state-sponsored schemes. To access these funds at the doorstep & drive financial inclusion in India, an Aadhaar-enabled Payment System (AePS) has been introduced.
National Financial Switch (NFS) is the largest network of shared Automated Teller Machines (ATMs) in India, facilitating interoperable cash withdrawal, card-to-card funds transfer and interoperable cash deposit transactions, among other value-added services in the country. Unified Payments Interface (UPI) has been termed as the revolutionary product in the payment system. Bharat Bill Payment System is offering a one-stop bill payment solution for all recurring payments with 200+ Billers in the categories Viz. Electricity, gas, water, telecom, DTH, loan repayments, insurance, FASTag recharge, cable, etc., are available across India.
NPCI has developed the National Electronic Toll Collection (NETC) program to meet the electronic tolling requirements of the Indian market.
It provides an electronic payment facility for customers to make payments at national, state and city toll plazas by identifying the vehicle uniquely through a FASTag. FASTags are Radio-Frequency Identification (RFID) stickers that are affixed to the vehicle windshield and enable the driver to make toll payments electronically while the vehicle is in motion without stopping at the Toll plazas by saving fuel and time.
With these products, the aim is to transform India into a ‘less-cash’ society by touching every Indian with one or more payment services. With each passing year, India is moving toward the vision of being the best payments network globally.
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