RBI permits non-bank entities to set-up ATM

In a major RBI move to spread ATM network, non-banking entities with a minimum net worth of Rs 100 crore have been allowed to set up, own and operate money dispensing machines on behalf of banks.

The Reserve Bank of India (RBI) in a notification said the automatic teller machines (ATMs) operated by non-banking entities will be known as ‘White Label ATMs’ (WLAs).

Each of these new ATM operator will have a bank sponsoring them, RBI said.

All services offered by regular ATMs will be available at white Label dispensers as well with existing debit or credit cards issued by banks. Customers of all banks can use the new ATM network.

So far only banks are allowed to set up and operate money dispensing machines in the country which has nearly 90,000 ATMs.

Non-bank entities intending to set up WLAs under these guidelines may approach RBI for seeking specific authorisation within four months from the date of issuance of these guidelines, RBI said.

Such non-bank entities should have a minimum networth of Rs 100 crore as per the latest financial year’s audited balance sheet, it said, adding the networth of at least Rs 100 crore has to be maintained at all times.

Although there has been nearly 23-25 percent annual growth in the number of ATMs, their deployment has been predominantly in tier I and II cities.

In spite of the banks’ pioneering efforts in this direction, much needs to be done, it said, adding, there is a need to expand the reach of ATMs in Tier III to VI cities.

The RBI final guidelines said non-bank entities proposing to set up WLAs have to apply to RBI for seeking authorisation under the Payment and Settlement Systems Act, 2007.

Five free transactions in a month as applicable to bank customers for using other bank ATMs would be inclusive of the transactions effected at the WLAs, it said.

While the WLA operator is entitled to receive a fee from the banks for the use of ATM resources by the banks customers, it said, WLAs are not permitted to charge bank customer directly for the use of WLAs. The operator would be permitted to earn extra revenue through advertisement and by offering value added services.

“The advertisements placed on such ATMs would be subject to Advertising Standards Council of India (ASCI) codes and other regulations,” the RBI guideline said.

The operator would be permitted to display advertisement of financial products confirming to the regulatory framework as laid down by RBI, SEBI, IRDA and PFRDA.

“While running advertisements on the WLA screen would be permitted, such advertisements should disappear once the customer commences a transaction in order to ensure that the customer is not distracted in any way during the process,” it said.

As per the guidelines, the WLA operator would not be entitled to any other fee from issuer bank other than the ‘interchange’ fee payable to acquirer bank under the present bank owned ATM scenario.

WLA operator is permitted to have more than one sponsor bank, it said, adding, all the transactions of WLAs serviced by this sponsor bank would be settled through it.

On cash management at the WLAs, the RBI guideline said, it will be the responsibility of the sponsor bank, who may if required, make necessary arrangements with other banks for servicing cash requirements at various places.

While the cash would be owned by the WLAO, it said, the responsibility of ensuring the quality and genuineness of cash loaded at such WLAs would be that of the sponsor bank.

At no point of time, the WLAO or his agents shall have access to the cash at the WLAs, it added.

RBI has floated three schemes for implementation. As per scheme A, the operator has to set up a minimum of 1,000 WLAs while in the second year twice the number of WLAs installed in first year.

In the third year three times the number of WLAs installed in second year, it said.

“The ratio of 3:1 would be applicable, that is for every 3 WLAs installed in Tier III to VI centres, 1 WLA can be installed in Tier I to II centres,” it said.

Out of the 3 WLAs installed in Tier III to VI centres, a minimum of 10 per cent should be installed in Tier V and VI cities, it said.

(curtsey: economic times)

Rupesh Yatesh Dalal
Head Research Department

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