The agreement follows an investigation by the parliamentary Treasury Select Committee into the growing number of fee-charging cash machines in the UK.

Banks and building societies have agreed to subsidise the cost of installing and maintaining more than 600 free ATM in poorer areas around the country. Banks currently pay an interchange fee when machines operated by other companies are used to access their accounts. As part of today's agreement, a 30-50% premium per transaction will be paid to ATM operators establishing machines at sites with lower customer-use in lower-income areas.

John McFall MP, chairman of the committee, says the agreement was "a huge step forward in our campaign for financial inclusion".

"This financial inclusion premium is the first example of such an innovative approach anywhere in the world. It will use the market forces that already shape the deployment of free cash machines to achieve and sustain an important public policy objective."

The ATM Working Group also stated that "crystal clear" signage should be displayed on every charging machine in the country.

"We want customers to see at a glance whether a machine is free or charging. Crystal clear transparency is what is required here - prominently placed signs in suitable large type," says McFall. "The new recommendations include the provision of clearer on-screen information, together with larger and standardised external signage."

In 1999 virtually all ATMs in the UK were free, but of the 60,000 cash machines now operating, 26,289 charge a fee regardless of the size of withdrawal.

A report released in July by national charity Citizens Advice found that customers in deprived communities are being hit the hardest by ATM charges as banks close branches and remove units.

Citizens Advice welcomed today's new agreement which it says is "great news for the poorest people".

In October The Royal Bank of Scotland (RBS) said it was rolling out 100 free-to-use cash machines across sub-post offices around the UK. This followed an earlier pledge to install 300 free-to-use cash machines in low-income areas following the Citizens Advice report.