RBI issues guidelines for White Label ATMs owned by non-banks

Mumbai: In a bid to accelerate the growth and wider spread of ATMs, the Reserve Bank today issued draft guidelines for permitting non-banking entities to set up, own and operate such money dispensing machines.

Non-bank entities proposing to set up such service will have to have a minimum net worth of Rs 100 crore, RBI said.

“The RBI has sought views/comments on the draft circular from banks, authorised ATM network operators, non-bank entities and members of public,” it said, adding that the stakeholders can make suggestions by 6 March.

The central bank said that it has reviewed the extant policy on ATMs.

“… it has been decided to permit non-banks to set up, own and operate ATMs to accelerate the growth and penetration of ATMs in the country. Such ATMs will be in the nature of White Label ATMs (WLA) and would provide ATM services to customers of all banks,” the draft guidelines said.

The banking sector has seen considerable growth in ATMS during recent years with around 87,000 machines operational across the country. However, they are largely restricted to the urban and metro areas.

“Although there has been about 30 per cent year-on-year growth in the number of ATMs deployed in the country since 2008, ATM penetration on a per capita basis continues to be less compared to other countries.

“There is, therefore, an abundant scope and a felt need to deploy more ATMs, particularly in Tier III to VI areas of the country,” the apex bank said.

The draft 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.

It suggested that only the cards issued by banks would be permitted to be used at the WLAs initially and acceptance of deposits shall not be permitted.

“The WLA Operator will be the ‘acquirer’ for all transactions at the WLA and earn his fee accordingly,” it

said.

The WLA 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 draft proposed.

It also added: “Being non-bank owned ATMs, the guidelines on five free transactions in a month for using other bank ATMs would not be applicable for transactions effected on the WLAs. The charges for the transactions should be displayed on the screen before the customer initiates the transaction.”

As per the draft 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.

“The WLA Operator shall also not be permitted to charge any fee from the customers for the use of the ATM resources,” it said, further suggesting that regulatory guidelines relating to compensation for failed ATM transactions would apply to transactions at WLAs.

“General guidelines governing the operations of the bank operated ATMs would apply mutatis mutandis to WLAs,” the draft guidelines said.

The Operator will have one ‘Sponsor Bank’ which will serve as the settlement bank for of all the transactions at the WLAs.

Settlement of all the transactions at the ATMs shall be done only in the books of the Sponsor Bank through the ATM Network with whom the operator has established connectivity.

The maintenance and servicing of the WLAs shall be the sole responsibility of the operator. The sponsor bank would be responsible for cash management at the WLAs.

“For the purpose of cash management, the sponsor bank may enter into tie-ups with other banks for loading and reconciliation of cash at various WLAs at locations where it has no presence,” the draft guidelines proposed.

While the primary responsibility to redress grievance of customers relating to failed ATM transactions will vest with the issuing bank, the sponsor bank will have to provide necessary support in this regard, including making available relevant records and information, it added.

White-level ATMs are not owned by banks but by private ATM service providers. Customers from any bank can deposit or withdraw money from such ATMs.

Besides increasing banking services, it will help sponsored banks to set-up ATMs without incurring capital

expenses for owning money dispensing machine.

At present, brown label ATMs are allowed in the country. In such cases, the hardware as well as lease is under the ownership of the service provider, while connectivity and cash handling and management is the responsibility of the sponsor bank.

PTI

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