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Indian banks decline ATM interchange reduction request

India's finance ministry has asked banks to cut interchange fees by more than one-third to encourage greater use of ATMs, but FIs say they can't afford to.

December 11, 2015

India's finance ministry has asked the nation's banks to reduce their interchange fees to single digits, but so far, the banks are not biting.

According to a report by India's Business Standard, banks have instead agreed to freeze the current interchange fee at 15 rupees per transaction, foregoing the 16.5 rupee fee the banks had previously sought.

The government has argued that reducing the fees — which would normally be passed on to customers in some form — would encourage greater use of ATMs. However, banks have countered that the increased traffic still would not make up for the drop in income.

"The finance ministry had asked to consider reducing the fee to single digits but we looked at the cost dynamics and realized that it is not feasible," an unidentified official involved in the decision-making process told the publication.

The report said that some banks have downsized their plans for ATM network expansion due to questions about financial viability and a growing trend toward the use of digital payments.