In a move that will slightly impact frequent ATM users, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) have jointly approved a Rs 2 increase in the interchange fee for cash withdrawals at ATMs.1 This revised fee structure will come into effect from May 1, 2025.2
The current interchange fee, which banks pay to each other when their customers use ATMs belonging to a different bank, will be increased by Rs 2 per transaction. This means that for transactions beyond the free ATM usage limits set by their respective banks, customers may witness a marginal increase in the charges levied.3
The decision to revise the interchange fee is likely aimed at providing greater financial viability for ATM operators and banks in deploying and maintaining ATM infrastructure, especially in rural and underserved areas. The rising costs associated with ATM operations, including maintenance, security, and upgrades, are understood to have necessitated this adjustment.4
What does this mean for ATM users?
While the increase of Rs 2 per transaction might seem nominal, it could add up for individuals who frequently use ATMs of other banks beyond their free transaction limits. Most banks in India currently offer a certain number of free ATM transactions per month at their own ATMs and at other banks’ ATMs.5 Once these limits are exhausted, customers are charged a fee per subsequent withdrawal.
Key takeaways of the revised interchange fee:
- Increase: The interchange fee for cash withdrawals at ATMs will increase by Rs 2 per transaction.6
- Effective Date: The revised fee structure will be implemented from May 1, 2025.7
- Impact: Customers exceeding their free ATM transaction limits may experience a slight increase in charges for using ATMs of other banks.8
- Rationale: The increase is intended to improve the financial viability of ATM operations and encourage wider deployment.
It is important for bank customers to be aware of their respective banks’ policies regarding free ATM transactions and the charges applicable thereafter. Planning withdrawals and utilizing their own bank’s ATMs or those within their free transaction network can help mitigate the impact of this fee hike.
The RBI and NPCI are expected to issue further guidelines and clarifications regarding the implementation of this revised interchange fee structure in the coming weeks. Banks will also be communicating these changes to their customers through various channels.
Yes, the statement “Cash Transaction of 2 lakh or more is PROHIBITED! (Income-Tax)” is generally correct under the Income Tax laws in India.
Here’s a breakdown of the rule as per Section 269ST of the Income Tax Act, 1961:
No person shall receive an amount of ₹ 2 lakh or more in cash in the following situations:
- In aggregate from a single person in a single day.
- In respect of a single transaction.
- In respect of transactions relating to one event or occasion from1 a single person.
Key Points:
- This rule applies to the receiver of the cash, not the payer.
- The penalty for violating Section 269ST is a sum equal to 100% of the amount received in cash.
- The prohibition covers the aggregate amount received in a single day, even if it’s through multiple transactions from the same person. It also applies to a single transaction exceeding ₹ 2 lakh, or multiple transactions related to a single event or occasion exceeding this limit from one person.
Exemptions:
There are certain exceptions to this rule, including:
- Receipts from government.
- Receipts from any banking company, post office savings bank or co-operative bank.
- Transactions of the nature specified in Section 269SS (related to acceptance of loans or deposits).
- Other persons or class of persons that the government may notify.
In summary, while there are some exceptions, generally, receiving ₹ 2 lakh or more in cash in the scenarios mentioned above is prohibited under the Income Tax Act in India.