Article

White Label ATMs (WLAs)- All You Want to Know
January 03 , 2013

Until RBI changed ATM rules early in 2012, only banks were allowed to set up and operate ATMs in India. ATMs came a long way in expanding the personal banking space. However most of the 90,000 ATMs are concentrated in the metros, urban and semi-urban areas.

RBI realized that increasing presence of ATMs in rural unbanked areas is a great way of bringing some of the banking services within their reach. But it is expensive for banks to set up and run ATMs by themselves and they wouldn't be keen on expanding ATM network to tier 3 to tier 6 places (classified based on population of Census 2011). Typically a bank needs to spend Rs 3-4 lakhs on installing an ATM and monthly recurring cost of Rs 40,000- 50,000 on operations depending on the location of the machine. So it has permitted non-banks to set up, own and operate ATMs in the country. These are White Label ATMs (WLAs).

Brown Label ATMs

Brown Label ATMs are those which are set up and leased by a non-bank entity but management of cash and bank network connectivity is managed by a bank whose brand appears on the ATM. This means a bank can choose not to renew its contract and the ATM lease can be taken by another bank. More than 50% of existing ATMs are said to be Brown Label ATMs.

Launch of White Label ATMs in India

Tata Communications Payment Solutions Ltd, a subsidiary of Tata Communications set up the first WLA near Mumbai in June 2013. Federal Bank has tied up as the sponsor bank with it for 15,000 ATMs. Muthoot Finance, SREI, Prizm Payments and other service providers for Brown Label ATMs are believed to be among WLA operators approved by RBI.

How White Label ATMs will work

WLA will be installed and operated by the non-bank entity. But supply of cash will be done by a sponsor bank with whom the WLA operator must tie up with.

Like in other ATMs, customers will not be charged transaction fee upfront but the card issuing bank might charge you for it. Customers of any bank can withdraw cash and enquire account balance from a WLA. Presently WLAs are not permitted to accept deposits. The present 5 free ATM transactions per month will include transactions at WLAs (RBI had earlier proposed to exclude transactions at WLAs for the 5 free ones).

WLAs are entitled to get fee from card issuing bank for transactions of their customers. They can run advertisements on ATM screen for additional revenue generation as well as provide other value added services.

Norms for failed transactions at WLAs will be similar as in other ATMs. The card issuing company is supposed to resolve complaint within 7 working days and provide compensation of Rs 100 per day beyond that. The responsibility of sponsor bank will end with providing necessary records of such failed transactions.

WLAs for financial inclusion

The reason why White Label ATMs are being encouraged is to increase ATM reach in the rural and remote parts of the country. Hence WLA operators have to follow the ratio of ATM presence in rural and urban areas as prescribed by RBI.

RBI has proposed the following three schemes, one which WLA operators have to opt for one:
  • Scheme A
Year -1 minimum of 1000 WLAs
Year -2 minimum of twice the number of WLAs installed in Year 1 and
Year -3 minimum of three times the number of WLAs installed in Year 2
Ratio of 3:1 would be applicable, i.e. for every 3 WLAs installed in Tier 3-6 centres, 1 WLA can be installed in Tier 1-2 centres.
  • Scheme B
A minimum of 5000 WLAs every year for three years with a ratio of 2:1
  • Scheme C
A minimum of 25,000 WLAs in the first year and at least another 25,000 in the next two years with the ratio of 1:1

Will WLAs change anything for you?

Banks can charge you a monthly or annual transaction fee for your WLA transactions exceeding 5 a month, including transactions at other banks' ATMs. Though this was the case earlier too transaction fee for WLA could be slightly different.

With the same code of procedures applying to WLAs for grievance redressal, fear of losing money in a failed transaction at WLA is also reduced.

You may get access to more value added services through WLAs going forward. Depending on how fast WLAs become operational and banks sponsor them, you would see many of these, especially in non-urban areas.

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