White Label ATMs permitted co-branded cards, buying wholesale cash from RBI and sourcing from SBs & RRBs

Reserve Bank of India (“RBI”) vide Circular No. DPSS.CO.OD.No.1916/06.07.011/2018-19 dated March 07, 2019 issued certain changes to the Guidelines governing the operation of White Label Automated Teller Machines (“ATMs”) with a view to enhance the viability of operating White Label ATMs (“WLAs”).

Until June 20, 2012 only banks were permitted by the RBI to set up ATMs, as extended delivery channels. On June 20, 2012 the RBI issued ‘White Label ATMs (WLAs) in India- Guidelines’ dated June 20, 2012 vide DPSS.CO.PD. No. 2298/02.10.002/2011-2012 to permit non-banking entities to set up, own and operate ATMs. Such ATMS are called WTAs. Every such non-bank entity would require prior RBI approval for setting up such WTA. RBI vide Circular No.  DPSS.CO.PD. No. 1088/02.10.003/2013-14 dated November 14, 2013 provided Clarification on Cash Handling norms for WLAs.

Basic Regulatory framework of WLAs

Eventually vide another Circular No.  DPSS.CO.PD.No.1025/02.10.003/2014-2015 dated December 05, 2014, RBI permitted WLAs to accept international credit/ debit/ prepaid cards and cards issued under card payment network schemes as authorized under the Payment and Settlement Systems Act 2007 provided the WLA operator must ensure establishment of technical connectivity with the respective card network operators either directly or through their sponsor banks. Cards issued under any other card scheme would also be permitted subject to entering into bilateral arrangement placed by existing authorized networks for such purpose.

Further, this notification permitted the facility of Dynamic Currency Conversion (“DCC”) for the use of international cards at WLAs, provided that such currency conversion rate will only be obtained from authorized dealer bank and provided further that such currency conversion is restricted to converting request by the international cardholder (based on the DCC option) to his home currency using a Basel Exchange Rate provided by authorized dealer banks. Furthermore, these guidelines provide for delinking of cash supply from that of sponsor bank arrangement, thus permitted WLAO to tie up with other commercial banks for cash supply at the WLAs. In this regard, the guidelines provide that the cash would be owned by the WLAO while the responsibility of ensuring the quality and genuineness of cash loaded at such WLAs would be that of the cash supplier bank.

Reviewed provisions:

The revised guidelines permit WLAOs to buy wholesale cash, above a threshold of 1 lakh pieces (and in multiples thereof) of any denomination, directly from the Reserve Bank (Issue Offices) and Currency Chests against full payment. WLAOs can also now source cash from any scheduled bank, including cooperative banks and regional rural banks. Furthermore, WLAO can offer bill payment and Interoperable Cash Deposit services, subject to technical feasibility and certification by National Payments Corporation of India (NPCI). Finally, advertisements pertaining to non-financial products/ services are permitted within WLA.

Notably, banks are hereby permitted to issue co-branded ATM cards in partnership with the authorized WLAO and may extend the benefit of ‘on-us’ transactions to their WLAs as well. An ‘on-us’ transaction is destined for bank owning the particular host, where the host checks the amount of cash requested, confirms that the customer has the amount and thereby authorises or denies the transaction as different from ‘off-us’ transaction. ‘off-us’ transactions involve the host directing the transaction to the customer’s financial institution which issues the same authorisation or denial to dispense cash

The permission to WLA operators to source cash from retail outlets accorded vide circular DPSS.CO.PD.No.1621/02.10.002/2016-17 dated December 30, 2016, stands repealed.

MANAL SHAH

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