HDFC Bank has reduced free cash transactions at bank branches for customers from five, to four. It has also raised the charges for transactions in excess of this limit for its savings and salary account holders from Rs 100 to Rs 150. The charges come into force from March 1.

Private banks ICICI and Axis banks already levy a similar charge for cash transactions at bank branches to reduce footfalls at bank branches. Officials at the two banks said this charge was suspended after demonetisation and had been restored. An Axis bank official said they restored the charges from 1 January.

HDFC customers will also have to pay a transaction charge of Rs 5 per thousand or a minimum of Rs 150 for cumulative cash transactions at their home branch exceeding Rs 2 lakh in a month.

At non-home branches, HDFC customers can deposit or withdraw up to Rs 25,000 rupees per day from any branch other than home branch but will have to pay Rs 5 per thousand - or at least for transactions over Rs 25,000 in a day.

The good news for customers who primarily use any of the 2.2 lakh ATMs in the country is that the Rs 150 cash withdrawal charge does not apply to ATM transactions. Banks - private or public - do not have the powers to alter the charges for use of ATMs.

Customers will still continue to get at least five free ATM cash withdrawals at their bank ATMs and three at ATMs of other banks in the six metros, Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad.

The Reserve Bank of India had last capped the charge for additional transactions at ATMs at Rs 20 plus taxes in 2007 and banks have been nudging the central bank to raise this ceiling.

The decision to raise, or reintroduce a cash transaction charge fits in with the government's stress on digital economy. The government's digital payments report had also called for disincentivising cash transactions by "imposing nominal charges after a certain limit".

The panel also felt that ATMs should display the cost of cash withdrawals because people did not understand the "implicit cost of transacting in cash".