Sunday, February 19

RBI allows non-banks to set up White Label ATMs (WLAs)

In a bid to expand the reach of banking services, the Reserve Bank of India (RBI) has allowed non-bank entities to open White-Label ATMs (WLA) across India in-line with developed countries.
The regulator has also laid down draft guidelines to set up and operate those ATMs. Side by side, this move will ensure fast-paced growth of the automated teller machines with involvement of corporates.

"RBI has reviewed the extant policy on ATMs and it has been decided to permit non-banks to set up, own and operate ATMs to accelerate growth and penetration of ATMs in the country. Such ATMs will be in the nature of White-Label ATMs and would provide ATM services to customers of all banks," the RBI said in a release.

"This move is aimed at benefiting customers who will have greater access to banking services," an executive director from a public sector bank told on condition of anonymity. "At the same time, banks will earn fee income from the WLA operators. However, banks will not stop expanding their own ATM networks in a cost-effective manner," he said.
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So far, ATMs have been growing at 30% year-on-year since 2008. Currently, there are approximately 87,000 ATMs in the country. This is considered to be less in comparison with other countries. Smaller cities and towns (read unbanked/under-banked areas) have not seen much growth in the ATM space.

What is a WLA?

Unlike regular ATMs, WLAs are not directly owned by individual banks. Any non-bank entity, be it a large corporate group (eg. Tata or Reliance) or any individual company can apply to the RBI to open those ATMs. However, companies will not have direct access to core-banking operations. Customers need to pay a fee for withdrawing/depositing money from such ATMs. It will be displayed in the ATM screen.

According to the draft guidelines, a WLA operator has to choose a "sponsor bank" who will serve as the settlement bank for all service transactions at those ATMs. This means, the WLA operator has to open a settlement account with the sponsor bank and also, it will fund the account. The sponsor bank has to be a member of one of the ATM-sharing networks (read consortiums). Currently, there are two such consortiums: National Payment Corporation of India and Cash Tree led by Bank of India.

The RBI mandates that the applying WLA operator must have a minimum net worth of Rs 100 crore. According to industry experts, telecom and retail companies are more likely to apply for setting up WLAs.

"Only cards issued by banks would be permitted to be used at the WLAs to start with. Acceptance of deposits at the WLA site into the account of the WLA operator or in any other account indicated by it shall not be permitted," RBI said.

A WLA operator would also be allowed to earn extra revenue through advertisement placed on such ATMs.

The primary responsibility to redress any customer complaint relating to failed ATM transaction will rest with the issuing bank with necessary support to be given by the sponsor bank.


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