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White label ATMs: A weapon for financial inclusion

ATMs are our nearest source of cash or money. But are they only of one kind everywhere? All the ATMs that we see, are differently labelled. In this article, we will go about the details of white-labeled ATMs (WLAs), their operation, and how they are a strong weapon for financial inclusion and social integration of backward classes...

An Automated Teller Machine(ATM) provides us with the direct facilities of accessing our accounts to withdraw cash and for carrying out other financial and non-financial transactions without having to visit the bank every time. The ATMs are labeled into six types:

  1. White-label ATMs- owned and run by non-bank entities, providing for everyone.
  2. Brown-label ATMs- owned by banks but these are operated by a third-party.
  3. Green-label ATMs- provide for agricultural transactions.
  4. Orange-label ATMs- provide for the transaction of shares.
  5. Yellow-label ATMs- provide for E-commerce and trade.
  6. Pink-label ATMs- especially established for women’s banking.

White-labeled ATMs

These ATMs are put up and operated by non-bank entities, authorized by RBI which are called ‘white-label ATM operators’ (WLAOs). White-label ATMs facilitate the people with banking services just like the usual ATMs, based on debit/credit/pre-paid cards issued by the banks.

The WLAO’s functions are confined to the procurement of transactions of all customers of the banks by laying out connectivity with the existing, ATM Network Operators /Card Payment Network Operators.

The first company in India, authorized by RBI to establish White Label ATMs is Tata Communications Payment Solutions Limited (TCPSL). It was launched under the new name ‘Indicash’ on 27th June 2013. Around 11,706 WLAs have been installed in India as on 31st February 2015. 

The objective of White label ATMs- financial inclusion

 The banking system has developed in manifolds when ATMs branched out across the country facilitating banking anytime, anywhere through their interoperability. It became even more convenient when cards issued by one bank could be used in the ATMs set up by other banks.

Earlier, only those banks were allowed to set up ATMs which were permitted by RBI to do so.  ATMs ensure financial inclusion and deliver various banking services to all customers. Financial inclusion focuses on the timely availability of financial services and adequate credit to the lower-income groups and other weaker sections of society.

The RBI categorizes different towns, cities, and villages into different ‘tiers’ based on their population sizes. This categorization helps the apex bank to design incentives for bank branch/ATM expansions. Tier-1 comprises of metropolitan cities and all urban centers which have huge population sizes. Tiers-2,3 & 4 mainly constitute the semi-urban areas and townships with a moderate-sized population and tiers-5&6 are the rural areas with very less population, sometimes lower than 5000.

 The number of ATMs in India experience a growth of 23-25% year-on-year, yet most of these ATMs are put up only in tiers 1& 2. Hence, the people residing in all the lower-population tiers, are deprived of the basic financial services, while the urban areas enjoy an abundance of them. The authorized banks alone, cannot provide for the extensive need of ATMs all over the country. Therefore, RBI allowed non-bank entities to set up White label ATMs since 20th June 2012, in the tiers- 3 to 6 to enhance the geographical expansion and financial inclusion aspects of our banking system. 

How do White Label ATMs operate?

The White Label ATM operators are the non-bank entities that are established in India under the ‘Companies Act 1956’. Normally, the Foreign Direct Investments(FDI) in WLAs were consolidated only after Government approval. But in September 2015, the government approved up to 100% FDI in WLAs in the automatic route.

The Non-bank entities can establish WLAs in India under the ‘Payment and Settlement Systems (PSS) Act 2007’, only after acquiring authorization from RBI. Apart from their registration under the Companies Act, the non-bank entities should also have a minimum net worth of Rs 100 crores recorded in the audited balance sheet of the latest financial year. This amount needs to be maintained throughout.

The WLA operators receive a fee from the banks in return for the ATM resources and services that they provide to the banks’ customers. Hence, the WLAs are not supposed to charge any extra fee from the customers for the direct use of WLAs. Acceptance of any kind of deposits by these ATMs is also disallowed. However, the WLAOs can advertise and offer valuable services to the customers according to the rules and regulations.

Every WLA has a Sponsor Bank, on behalf of which it provides banking facilities to the customers of the Sponsor bank. So the Cash requirements and management of the WLAs are taken care of by the Sponsor Bank, who may tie-up with other banks if required, for servicing cash requirements at various places. A WLAO can have more than one Sponsor Bank. The cash parked at the WLAs by the Sponsor bank is owned by the WLAO. But only the Sponsor bank is accountable for the value and credibility of that cash. The WLAO and its agents have no access to the cash at the WLAs.

The WLAOs are barred from taking over the ATMs that are directly operated by banks. Based on the need for ATMs in different tier centers, the prescribed ratios for installing WLAs are, 1:3 or 1:2 or 1:1 i.e. for every one WLA installed in Tiers-1& 2, at least one or more WLAs have to be set up in the backward tiers – 3 to 6. This would ensure equitable distribution of financial services across the country.

The duty of redressal of customer grievances concerning any failed transaction or other issues lies with the Issuing Bank which issues the ATM cards. Yet, in this regard, the Sponsor Bank provides the necessary support, to ensure that the WLAO furnishes all relevant records and information to the Issuing Bank. For the smoother functioning of such procedures, the Sponsor Bank and the WLAO must have pre-planned arrangements.

The abiding regulations of the RBI regarding the time-limit within which the customer grievances concerning failed ATM-Transactions should be resolved, also apply to WLAs. If any issue is not resolved within the time limit, then the Issuing bank has to pay a prescribed amount as a penalty and this amount will be restored with the Issuing bank by the Sponsor bank. The Sponsor Bank and WLAO may have appropriate arrangements for the recovery of such amounts.

The main functions of WLAs are cash dispensing, providing account information, facilitating short/mini statement generation, changing the PIN, providing chequebooks, etc. Whereas, activities like deposition of cash, regular bill payments, and purchasing re-load vouchers for mobiles are not permitted in WLAs, unlike in ATMs.

New guidelines:

The RBI released some new guidelines to relax the norms for White label ATMs, in March 2019. They are:

  • The WLA Operators can now buy wholesale cash, above a threshold of 1 lakh pieces (and in multiples thereof) of any denomination, directly from the Reserve Bank (Issue Offices) and Currency Chests against full payment.
  • The operators can source cash from any scheduled bank, including Cooperative Banks and Regional Rural Banks.
  • The WLAOs can now offer bill payment and Interoperable Cash Deposit services to the customers, but these should be subject to technical feasibility and certification by the National Payments Corporation of India (NPCI).
  • The RBI has also allowed the operators to display advertisements about non-financial products/services anywhere within the WLA premises, including the WLA screen, except the main signboard. However, it should be ensured that the advertisements running on the screen disappear once the customer initiates a transaction.
  • Now, the Banks may issue co-branded ATM cards in partnership with the authorized WLA Operators and may extend the benefit of ‘on-us’ transactions to their WLAs as well. (a transaction carried out at an ATM of the card-issuing bank, is called an On-us transaction.)
  • All guidelines, standards, and control measures applicable to banks relating to currency handling, and cyber-security framework for ATMs, shall also apply to the WLA Operators.

These guidelines focus on mainstreaming the WLAs, so that, their reliability improves and more people would avail the services. The WLAs are great assets that contribute largely to the social and financial inclusion agenda, by penetrating deep into the country in better numbers. The government may not have enough funds to put up as many ATMs as a private company can. Hence, the concept of WLAs is a boon in disguise, which would raise the living standards of our poor brothers and sisters by providing them timely cash and essential financial services.

India is a densely populated country with a population of 1.3 crores and cash is the only means of survival for most people, especially in the suburban and rural areas. India lags behind other global markets by a huge margin, in terms of ATM penetration. According to a survey, India has only 18 ATMs per lakh of population, as compared to China (63), Brazil (81), Japan (107), and Australia (132). In the tiers 3 to 6, the situation is even worse with only 5 or even less number of ATMs for every lakh of population.

Also read : Bank of Baroda launches WhatsApp banking service

The White Label ATMs can improvise the situation drastically, by providing similar financial facilities as the usual ATMs, complying with RBI’s directives. The number of WLAs has been gradually increasing in the country, and with our cooperation and faith, these financial units can act as powerful social integration-weapons, enhancing equitable distribution of monetary facilities among all the citizens.

Shalini Koppula
Hi, I am Shalini Koppula, a student of Xavier law school Bhubaneswar. I'm a socially driven writer and an enthusiastic reader. I want to advocate optimism through my work, and layout peace and love!


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