They limit you for security reasons. Then that way if someone knew your pin and had your debit card, only $200 or the limit could be withdrawn without getting a picture of the culprit on camera by making them go to the bank.
You can have it set to whatever amount you want, assuming you have enough money in the account. When I am going on vacation, I usually have my daily cash limit raised, because I am not ever sure that I can use debit for purchases. That way, I am not short on cash.
I believe that the banks set the initial amount relative to your account activity.
It depends on the bank or credit union you belong to. I work for a Federal Credit Union and we "score" all of our members (basic, gold and VIP) depending on your score, that sets your limit (between $200-$600).
I work in Loss Prevention, so there are times when I will lower some limits a little more. We also have 100% holds on all deposits at ATM Machines for basic members. That is because people will "empty envelope" at an ATM and then try to withdraw funds. The hold allows the bank or credit union to check the envelopes the next morning prior anyone withdrawing any funds.
Mine has a limit of Â£300 perday, thats as many withdrawals as I want though. I think most of the banks arround here have that limit. If I wanted more I could go into the bank. One of the reasons is they don't hold endless supplies of cash inside an ATM so if everybody could just withdraw whatever they wanted, the cash would run out quicker.
Also inside my bank if I want to withdraw more then Â£1200 in one go, I have to order it with 24 hours notice because they just don't hold enough cash on the premises.
Right before hurricanes they sometimes limit it even further. I was quite upset 2 years ago when I was only allowed me to withdraw $100 of MY MONEY from after waiting in a huge line. They actually closed that particular machine and routed us all to the drivethru instead. I understand that they had many many withdrawls because everyone needs cash at a time like that, but I think they should have made arrangements to have extra cash on hand.
I did end up getting more money. I drove around that day until I found another ATM that would dispense money.