White Label ATMs May Get a Boost by FDI but Hurdles Are Yet to Be Addressed
One of the major hurdles that Pradhan Mantri Jan Dhan Yojana has been facing is the availability of cash withdrawal facilities within a reasonable range of distance. It is true that the banks in India have an extensive network of ATMs (Automatic Teller Machines) but those networks are still not enough.
Put in perspective, 150 ATMs serve every 1 million Indians. Compared to this, China has 350 ATMs serving every 1 million Chinese people. Because of the low availability of ATMs, though people have been dumping their money in PMJDY, they do not have proper access to withdrawal outlets, causing a major challenge to the effectiveness of the financial inclusion program.
Of course the private sector was called for some help. There are several private sector companies which have license to operate these cash machines. These privately operated cash machines are known as White-Label ATMs. Some of the license holders include names like:
- BTI Payments Private Ltd.
- RiddhiSiddhi Bullions Ltd.
- Srei Infrastructure Finance Ltd.
- Vakrangee Ltd.
- Muthoot Finance Ltd.
- Prizm Payment Services Pvt. Ltd.
- Tata Communications Payment Solutions.
White-Label ATMs allow a host of financial activities which include:
- Cash withdrawal using domestic prepaid cards, credit cards and debit cards.
- Initiate balance inquiry.
- Change PIN.
- Get mini statements.
In short, most of the major functions that are offered by bank ATMs are available and interestingly, customers are charged the exact same rates that are charged by bank ATMs. Every private operator needs to find a bank that will be sponsoring the operations of the machines installed by these private players. RBI clearly mentioned that the banks need to maintain cash in these White-Label ATMs and will also be responsible for settling all transactions. On the other hand, the private operators need to take care of servicing and maintenance of these White-Label ATMs.
While this is good from customers’ perspective, the major hurdle is faced by the White-Label ATM operators. According to these operators, the cost of operating these machines is way too high because interchange rates that they receive is not enough for compensating for the operational costs.
Managing Director of NCR Corp. India Pvt. Ltd., Mr. Navroze Dastur, said that apart from three major players in the White-Label cash machine business, almost every other player has failed to get results as expected. The three players that have managed to get some results are Prizm that maintains a network of 1000 cash machines, BTI which maintains a network of 2000 cash machines and Tata which maintains a pool of 5000 cash machines in its network.
According to RBI mandate, 67% of all White-Label ATMs are operate in Tier III to Tier VI rural areas whereas only 33% are to be functional in Tier I and Tier II cities of Urban locations. This final mandate came from RBI in 2012 in month of June.
White-Level ATMs are capital intensive and players in this business are required to invest a huge sum of capital to make these machines operational and also maintain them properly. In order to deal with this, the Government of India has given green signal to 100% FDI flow through automatic route for these private players. This boost in FDI or Foreign Direct Investment will provide the necessary capital supply to the private players to deploy more and more of these cash machines that will eventually help to boost the cause of Pradhan Mantri Jan Dhan Yojana by increasing the cash outlets as mentioned revealed in a government statement that was given on 4th of September, 2015.
According to the statement, more than INR 22,000 crores have been already mobilized through PMJDY and now the government now intends to focus more on creating cash outlet facilities.