RBI Forms Panel to Investigate White-Label ATM Charges

19 Jul 2024 , 12:59 PM

A committee has been established by the Reserve Bank of India (RBI) to examine the white-label ATM (WLA) charge structure. According to those with knowledge of the development, this committee will assess the current policies and procedures with the goal of recommending a just and sustainable model that balances the interests of all stakeholders.

A bank executive stated to ET, “An assessment will be done on fee structure, existing ATM infrastructure, and international best practices.” The committee will present its findings to deputy governor T Rabi Sankar.

From 2024 to 2032, the industry projects that India’s ATM market will expand at a compound annual growth rate (CAGR) of 9.2%.

Leading banks, ATM makers, and the National Payments Corporation of India (NPCI) are among the parties represented on the committee, which is led by Indian Banks’ Association CEO Sunil Mehta. There are currently four authorized non-bank companies in the nation running white-label ATMs.

ET quoted an  industry executive stating, “The biggest challenge is the interchange fee, which is currently the same for both bank-operated ATMs and WLAs.” The executive also added that as digital banking has grown, ATM transactions have decreased, making operations unsustainable.

“Besides, most WLAs operate in rural areas where transactions are low as compared with urban areas,” he stated. For a financial transaction, the interchange fee is approximately ₹17, while for a non-financial transaction it is around ₹6. In essence, this means that if a bank’s customers use another bank’s ATM, the bank provides ₹17 to the other party.

With an emphasis on tier-2 to tier-4 centers, the RBI permitted non-banking entities established under the entities Act to establish, own, and run ATMs known as WLAs in 2012. The goal of this initiative was to increase the number of ATMs in the nation. In order to overcome the limitations on cash sourcing, it permitted white-label ATM operators (WLAOs) to obtain cash from retail establishments in 2016. The regulator permitted WLAs to have on-tap authorization in 2019.

WLAOs had previously proposed raising the interchange charge to ₹30 for financial transactions and ₹10 for non-financial transactions. Additionally, they had suggested that they take into account the possibility of charging access fees or convenience costs in addition to interchange fees.

A committee appointed by the RBI in 2019 to examine the ATM interchange fee structure also suggested that the RBI examine interchange and customer ATM usage fees at predetermined intervals.

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