The Reserve Bank of India (RBI) allowed an increase in the interchange fee structure for ATM transactions after almost 9 years, considering the increasing cost of Automated Teller Machines (ATM) deployment and expenses towards ATM maintenance incurred by the banks and white label ATM operators.
- Accordingly, the RBI has hiked the interchange fee per transaction from Rs 15 to Rs 17 for financial transactions and from Rs 5 to Rs 6 for non-financial transactions in all centers, effective August 1, 2021.
What is Interchange Fee
The card issuing bank pays an interchange fee to the operator of the ATM when a customer makes a transaction at an ATM that does not belong to the card-issuing bank. Currently, the card-issuing bank pays an interchange fee of Rs 15 for each cash transaction and Rs 5 for each non-cash transaction.
Background
- In June 2019, RBI had constituted a committee under the chairmanship of VG Kannan, the then chairman of the Indian Banks' Association, to review the entire gamut of ATM charges. The recommendations of the committee were made public in July 2020.
RBI also said that customers will be eligible for five free transactions, which includes financial and non-financial transactions, every month from their own bank ATMs. And, they will be eligible for three free transactions (both financial and non-financial) from other banks’ ATMs in metro cities. In non-metro centers, customers will be able to do five transactions (financial and non-financial) from other bank ATMs.
These new rates have become applicable from August 1, 2021, as per the RBI's direction.
Beyond the prescribed number of free transactions that a customer is eligible to do from other bank ATMs’, currently, they are charged Rs 20 per transaction. But, RBI has now hiked this interchange fee from Rs 20 to Rs 21 per transaction, effective January 1, 2022.
NACH Will be Available 24x7
Besides, National Automated Clearing House (NACH) has been made available on all days of the week, effective August 1, 2021.
NACH, a bulk payment system operated by the National Payments Corporation of India (NPCI) facilitates one-to-many credit transfers such as payment of dividend, interest, salary and pension.
It also facilitates collection of payments pertaining to electricity, gas, telephone, water, periodic instalments towards loans, investments in mutual funds and insurance premium.
During the bi-monthly monetary policy review in June, RBI Governor Shaktikanta Das had announced that in order to further enhance the convenience of customers, the NACH will be available on all days of the week.
The facility was available only when banks were open, usually between Monday to Friday.
Further, since most companies use NACH for salary credits these also did not happen on bank holidays.
About NACH:
NACH is a web based platform to facilitate interbank, high volume, electronic transactions for Banks, Financial Institutions, Corporates and Government. It basically functions like an electronic clearing service available especially for banks.
NACH was launched by the National Payment Corporation of India (NPCI). It is very useful to clear bulk and repetitive transactions that takes place among banks.
NACH System is used for making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension etc. and also for bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium etc.
NACH’s Aadhaar Payment Bridge (APB) System has been successfully channelizing Government subsidies and benefits (DBT) to the intended beneficiaries using the Aadhaar numbers. The APB System links the Government Departments and their sponsor banks on one side and beneficiary banks and beneficiary on the other hand.
News Source : Business Standard
