The Reserve Bank of India (RBI) on Thursday allowed banks to increase charges for cash and non-cash ATM transactions beyond free monthly permissible from next year.

Bank customers will have to pay Rs 21 per transaction on automated teller machines (ATM), up from Rs 20, if they exceed the monthly limit of free transactions. This comes into effect from 1 January 2022.

"To compensate the banks for the higher interchange fee and given the general escalation in costs, they are allowed to increase the customer charges to Rs 21 per transaction. This increase shall be effective from January 1, 2022," the RBI said in a circular.

However, customers will continue to be eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. They would also be able to do three free transactions from other bank ATMs in metro centres and five in non-metro centres.

Also, effective August 1, 2021, banks are allowed to increase 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 centres, the circular said.

ATMs are deployed by banks for serving their own customers and also provide services to other banks'' customers as acquirers where they earn interchange income.

The RBI said the charges have been allowed to be increased given the increasing cost of ATM deployment and expenses towards ATM maintenance incurred by banks/white label ATM operators, as also considering the need to balance expectations of stakeholder entities and customer convenience.