India is a land of opportunities. There are many business ideas which can be implemented in India and will lead to growth and development of country as well as that of the entrepreneurs. One great opportunity lies in investment in ATM (Automatic Teller Machine) business. With the wave of Digital India, and the focus on cashless economy, the need for ATM’s has increased. ATM serve as an ‘extended delivery channel’. This is one of the great prospect available in the banking sector.
In the earlier system of law, only banks were permitted to set up an ATM. Therefore, generally there are ATM’s of various banks; but it is important to note that, a new concept of White Label ATM’s have emerged. This concept provides an opportunity to companies meeting certain threshold requirements of setting an ATM business in India and earn profits.
White Label ATM’s
The Reserve Bank of India (RBI) has leveraged and given freedom to non-bank entities which are established in India under the Companies Act, 1956 or Companies Act, 2013 to set up, own and operate ATM’s in India. The main rationale behind granting the licence for White Label ATM’s is to increase the geographical spread of ATM’s for enhanced customer service.
Entities Involved:
- Licence
RBI grants licence to non-bank entities to open a White label ATM’s under the Payment and Settlement Act of 2007. This Act aims to supervise and regulate payment systems in India and RBI has been given the authority for the same under the Act.
- White label ATM Company: Non-Bank Entity
It rents the place for the ATM to the banks and carries out the maintenance and service of the ATM’s on periodic basis.
- Sponsor Bank
This is the bank which will load the cash in the White label ATM’s and ensure that no fake currency or counterfeit currency notes are circulated through such ATM’s.
- Payment network operator
They provide technical connectivity in the system. Like Visa, MasterCard, the National Financial Switch (NFS under National Payment Corporation of India).
Basic Legal Requirements
- An entity established under Companies Act, 1956 or Companies Act, 2013, i.e. set up in India.
- A current bank account.
Reasons to Set up White Label ATM by an entity
When an ATM or a White label ATM is set up in Metro centre then three free transactions are allowed and if it is set up in non-metro centre then five transactions are allowed through the White label ATM. After the number of threshold transactions fee for the exceeding transaction shall be charged as Rs. 20/- and an additional fee of Rs.5 is charged for enquiry, balance etc. However, the White label entity cannot charge the customer directly, therefore instead of the same, the sponsor bank charges the customer and deduct the amount from the account of the customer and the same is paid to the company.
Drawbacks
As seen above there are many benefits of White label ATM’s, however there are certain essential banking services which cannot be provided by the White label ATM’s.
- Acceptance of deposits are not permitted
- Regular payment of bills is not permitted
- Purchase of Re-load Vouchers for Mobiles is not permitted.
Therefore, this sums up in total the benefits of setting up White label ATM’s and also the legal requirements and as well as the drawbacks.
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