In an effort to extend the reach of banking services via automated teller machines (ATMs) (currently at close to 90,000) in Tier III and Tier IV towns, the Reserve Bank of India (RBI) has permitted 17 non-bank entities to set up, own and operate white label ATMs (WLAs).

White label means, an ATM that does not have any label of any bank. They function just the same way as any other bank-run ATM. It will serve customers of all the banks.

There are three parties involved in WLAs:

1. Non-bank corporate entity which is to set up, own and operate the WLA
2. Authorized ATM network operators/ card payment network operators like RuPay, Visa or MasterCard
3. Sponsor bank for cash management, funds settlement as well as customer grievance redressal.

An existing bank can save huge costs on account of setting up and operating ATMs. On an average, a bank incurs capital expenditure of Rs 3-4 lakh per ATM buying in addition to operation costs of Rs 40,000-50,000 per month per ATM depending on rent, security and electricity.

The WLA operator will be entitled to receive a fee from the banks for the use of ATM resources by the banks' customers, but will not be allowed to charge bank customer directly for the use of WLAs. Current fees of Rs. 15 per cash withdrawal transaction and Rs. 5 per balance enquiry will apply. Also, the WLA operator will be permitted to display advertisements and offer value added services.

RBI has given 17 licences to non-bank entities in early April for establishing WLAs, including to a Tata Communications Payments Solutions, SREI Infra, Vakrangee Software, Sequoia Capital-backed Prizm Payments, Mumbai based AGS Transact, among others. There is potential for roll-out of 1.5 lakh WLAs over next 3 years, if such ATMs would be rolled out if all 17 become operational.  

Worldwide, white-label ATMs are in use in Canada and some African and European countries.