New ATM Rules Effective May 1, 2025: Transaction Charges to Increase After Free Limit
Key Changes in ATM Transaction Charges
The RBI’s updated framework, effective from May 1, 2025, focuses on revising charges for transactions exceeding the free limit, adjusting interchange fees, and ensuring the financial sustainability of ATM operations. The key highlights include:
Increased Transaction Fee: Customers will now pay ₹23 per transaction (plus applicable taxes) for cash withdrawals and non-financial transactions, such as balance inquiries or mini-statements, after exhausting their free monthly limit. This is up from the previous charge of ₹21, implemented in January 2022.
Applicability: The new charges apply to transactions at both own-bank and other-bank ATMs, as well as Cash Recycler Machines (CRMs), except for cash deposits.
Rationale: The RBI has justified the fee hike as necessary to cover escalating costs, including ATM maintenance, cash handling, security upgrades, and operational expenses. The decision follows recommendations from the National Payments Corporation of India (NPCI) and lobbying from white-label ATM operators, who argued that existing fees were unsustainable.
Free Transaction Limits Remain Unchanged
Despite the fee increase, the RBI has maintained the existing free transaction limits for savings account holders across all banks in India. These limits include both financial (e.g., cash withdrawals) and non-financial (e.g., balance inquiries) transactions:
Own-Bank ATMs: Customers are entitled to five free transactions per month.
Other-Bank ATMs:
Three free transactions per month in metropolitan cities.
Five free transactions per month in non-metropolitan areas.
Counting Transactions: At own-bank ATMs, only financial transactions count toward the free limit, while non-financial transactions may remain free at some banks, like HDFC Bank. At other-bank ATMs, both financial and non-financial transactions are counted.
Once these limits are exceeded, the ₹23 fee (plus taxes) will apply per transaction, potentially increasing costs for frequent ATM users, particularly those relying on other-bank ATMs.
Impact on Customers and Banks
The revised charges are expected to have varying impacts on customers and financial institutions:
For Customers: Frequent ATM users, especially in metro cities with lower free transaction limits at other-bank ATMs, may face higher monthly expenses. For example, a customer in a metro city exceeding the three free transactions at another bank’s ATM could incur ₹23 per additional withdrawal, plus GST, leading to noticeable costs over time. To mitigate this, customers are advised to:
Use their own bank’s ATMs to maximize free transactions.
Plan withdrawals to stay within free limits.
Opt for digital payment methods like UPI, mobile banking, or card swipes, which are often fee-free.
For Banks: The fee hike aims to alleviate financial pressures on banks, particularly smaller institutions and public sector banks (PSBs) that struggle with ATM maintenance costs. Government data indicates that while the State Bank of India (SBI) has earned significant revenue (₹2,043 crore over five years) from ATM charges, nine PSBs have collectively incurred losses of ₹3,738.78 crore in the same period. The increased fees are expected to support ATM network expansion and enhance service quality.
Smaller Banks: Smaller banks with limited ATM networks may face higher interchange fees, as their customers rely more on other banks’ ATMs. This could lead to increased costs passed on to customers or higher account maintenance fees.
Bank Notifications and Specific Policies
Several major banks have already notified customers of the upcoming changes, aligning their policies with the RBI’s guidelines:
HDFC Bank: From May 1, 2025, ATM transaction charges beyond the free limit will be revised to ₹23 plus taxes. At HDFC Bank ATMs, only cash withdrawals beyond the free limit will incur charges, while non-financial transactions remain free.
Punjab National Bank (PNB): PNB has specified that charges for transactions exceeding free limits at other-bank ATMs will be ₹23 per financial transaction and ₹11 per non-financial transaction (excluding GST), effective from May 9, 2025.
IndusInd Bank: All savings, salary, NRI, and current account holders will be charged ₹23 per cash withdrawal at non-IndusInd Bank ATMs beyond free limits, effective May 1, 2025.
State Bank of India (SBI): SBI has revised its ATM policies effective February 1, 2025, offering five free transactions at SBI ATMs and ten at other-bank ATMs for all savings account holders, regardless of location or balance. From May 1, the ₹23 fee will apply for transactions exceeding these limits.
Broader Context: Push for Digital Banking
The RBI’s fee hike aligns with a broader strategy to promote digital banking as a cost-effective and convenient alternative to cash transactions. Data from the RBI shows a decline in ATM cash withdrawals, from 57 crore transactions in January 2023 to 48.83 crore in January 2025, reflecting a growing preference for digital payments. India’s digital payment ecosystem, particularly the Unified Payments Interface (UPI), has seen explosive growth, with over 12 billion transactions recorded in January 2024 alone.
The increased ATM charges are expected to further incentivize customers to adopt UPI, mobile banking, and other digital platforms, which offer fee-free transactions and greater flexibility. Experts suggest that this move could particularly benefit business correspondents (BCs) and MicroATM networks, especially in rural and semi-urban areas, where fee-free transactions remain available.
Tips to Avoid Extra Charges
To minimize the impact of the new ATM charges, customers can adopt the following strategies:
Use Own-Bank ATMs: Stick to your bank’s ATMs to take advantage of the five free transactions and avoid charges for non-financial transactions at some banks.
Monitor Transaction Limits: Keep track of your monthly ATM usage, especially at other-bank ATMs in metro cities, where the free limit is lower.
Embrace Digital Payments: Use UPI, mobile apps, or debit/credit cards for payments to reduce reliance on cash withdrawals.
Consolidate Withdrawals: Plan larger, less frequent withdrawals to stay within free limits, rather than making multiple small transactions.
Check Bank Policies: Review your bank’s specific ATM policies, as some, like SBI, offer higher free transaction limits for certain account types.
The RBI’s new ATM rules, effective May 1, 2025, mark a modest but significant change for frequent ATM users, with transaction charges rising to ₹23 after free limits are exceeded. While the free transaction limits remain unchanged, customers are encouraged to adapt their banking habits to avoid additional fees. By leveraging own-bank ATMs, monitoring usage, and embracing digital payment alternatives, users can mitigate the impact of the fee hike. For banks, the increased charges offer financial relief to sustain ATM operations, but the move also underscores India’s ongoing shift toward a digital-first banking ecosystem. Staying informed and strategic about ATM usage will be key to managing costs in this evolving landscape.