[Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk

Economy64 Comments

Nitin Singhania Art & CultureShankarIAS Environment
  1. What is White label-ATM?
  2. What’s the difference between Brown label vs White label ATM?
  3. Stakeholder/Players in White label ATM game?
  4. Why do we need White Label ATM?
  5. How does White Label ATM help in financial inclusion?
  6. Facilities @White label ATM?
  7. Where does the Commission come?
  8. White label ATM: Challenges/Limitations/Problems
  9. Mock Questions

What is White label-ATM?

  • Traditionally, Automated Teller Machines (ATMs) have respective bank’s logo. So just by looking, this is SBI’s ATM, this is ICICI’s ATM and so on.
  • But White label ATM doesn’t have such Bank logo, hence called White label ATMs.
  • RBI has given license / permission to non-bank entities to open such ATMs.
  • Any non-bank entity with a minimum net worth of Rs.100 crore, can apply for white label ATMs. (not just NBFC, any non-bank entity can apply.)
  • Late 80s: first ATM in India; 2012: RBI issues guideline for White label; 2013: RBI gives license/permission.
  • Tata Communications Payment Solutions Limited =the first company to get RBI’s permission to open White label ATMs.
  • They started their chain under brandname “Indicash”.
  • Other White label= Muthoot Finance, Srei Infra., Vakrangee Software, Prizm Payments, AGS. More than 15 companies given such permission.

White Label ATM

difference between Brown vs White label ATM?
Brown Label ATMWhite label ATM
When banks outsourced the ATM operations to a third party.When ATMs are owned and operated by non-bank entities but they are not doing ‘outsourcing-contract’ from a particular bank.
The private company owns & operates the ATM machine, pays office rent. They negotiate with the landlord, electricity company, telecom company and so on.Same
The bank (which has outsourced this work) provides cash for that ATM.Sponsor bank provides the cash.
ATM has logo of that bank (which has outsourced this work).No. White label ATM doesn’t have such logo. Not even of the sponsor bank.
No such compulsion.They’ve to compulsory open a few ATMs in (tier 3 to tier 6) areas. (explained after a few paragraphs)
RBI not involved directly. These outsourcing companies have contractual obligation with their respective banks.RBI directly involved because these white label Companies have to separately get license/permission from RBI to run business.

Initially, RBI did not permit White label ATMs, and Banks wanted to reduce the operational cost, so they came up Brown Label ATM (outsourcing) system.

So in a way, the evolution is: (Bank’s own ATM) =>(Brown Label) => (white label)

Stakeholder/Players in White label ATM game?

RBIGives license/permission to open White label ATMs. Under Payment and Settlement Systems Act, 2007. (And NOT under Banking regulation act or SARFAESI Act, Ombudsman or any other act.)
(non-bank) White Label ATM companyRents the place, looks after maintenance and servicing of the machine.
Sponsor bankLoads the cash in those White label ATMs. This also ensures counterfeit/fake currency notes are not circulated through white label ATM.
Payment network operator
  • Visa, Mastercard, the National Financial Switch (NFS under National Payment Corporation of India.)
  • They provide technical connectivity in the system.

Why do we need White Label ATM?

  1. ATMs offer convenience to customer (Because he doesn’t need to visit Bank branch every time). ATMs are open 24/7, and even on holidays.
  2. Convenience to bank, because they don’t have to keep large staff/office (compared to a system without ATMs). It reduces their cost of branch-operation.
  3. But in India, ATM penetration has been very low. Observe:
CountryApprox. No. of ATMs per 10 lakh population
Indialess than 100

Most of the ATMs concentrated in urban areas- that too only at prime locations e.g. near shopping malls and airports= financial inclusion not achieved.

How does White Label ATM help in financial inclusion?

RBI requires White label-ATM companies to install machines in the ratio of
Two ATMs in (tier 3 to 6 place) : One ATM in (tier 1-2 place).

Confused? Observe:
Centercitycensus definition:population is ____White Label ATM
MetropolitanTier 110 lakh and aboveif company wants to Setup ONE ATM here,
Urban1 lakh and above
Semi-UrbanTier 250,000 to 99,999
Tier 320,000 to 49,999Then, company must install TWO ATMs here.
Tier 410,000 to 19,999
RuralTier 55,000 to 9,999
Tier 6Less than 5,000.

For example, RBI has permitted Tata to deploy 15000 White label ATMs. Meaning [2/(2+1)] x 15000 = 10,000 ATMs will be setup in the rural and semi-urban areas. = more access to ATM= financial inclusion.

Facilities @White label ATM?

  1. Any customer from belonging to any bank, can use it.
  2. Every month, Five transactions are free.
  3. White label ATM users can also withdraw a maximum of 10,000 per transaction.
  4. Open 24/7 and on holidays
  5. Value added services like mobile recharge, utility bill payments etc.

Where does the Commission come?

White ATM Company doesn’t run for charity or goodwill. Company has to make profit. So where does the aslimaal/commission come?

Before White label ATMWith White Label
  1. If you used card in your own bank’s ATM= everything free.
  2. If you used card on other bank’s ATM= first five transactions free (every month). After that commission charges of Rs.~17-20 for taking out money and Rs. 5-9 for making balance inquiry or mini statement. (This commission directly charged on your account.)
  1. First five transactions free every month.
  2. Then, transaction fee ~Rs.15 and balance inquiry fee ~Rs.5 BUT this commission is paid by your bank to the White label Company.
  3. White label company cannot directly charge money on you. (RBI rules).
  4. Although it doesn’t mean White label ATM=totally “Free” because your bank will cut those charges from your account.

Additionally, White Label ATM company can make commission from

  1. value added services @their ATM e.g electricity /telephone bill payments, mobile recharge, DishTV-Tatasky recharge etc.
  2. Selling advertisement space in the room and above the door.

White label ATM: Challenges/Limitations/Problems

  1. For a white label ATM company, biggest challenges = office rent + Security guard.
  2. If they want to make profit, every White ATM needs to get at least 75-125 transactions per day= very unlikely, especially when RBI requires them to setup 2/3rd of the ATMs in semi-urban and rural areas.
  3. Even in Bangalore, some of the white-label ATMs are getting barely 2-3 customers every week=loss making business at the moment.
  4. Despite the entry of White Label ATM companies, the regular banks have not slowed down their ATM expansion drive, because branded ATM=passive advertisement and customer loyalty. Result? ATMs everywhere =too much competition= small players will bleed out just like in aviation business.
  5. Last year, a lady was brutally attacked in ATM booth in Bangalore. Police have warned all banks to put security guards=input cost increased. Banks themselves admitting “five transactions free every month=loss making” in this scenario.
  6. SBI has the largest ATM network in India (30,000+)= economies of scale= they’re supposed to be making profit. But this week, even SBI chairman herself has admitted their ATM business is making losses. So, it is unlikely that White label ATM companies will run profitably for a long period of time.
  7. Customer complaint: failed ATM transactions = matter falls into Issuing Bank (=bank where you have account). Some critiques fear it will lead to taarikh pe taarikh because data records are with sponsor bank and machine maintenance is under ATM company’s responsibility.

NESTED Design: Contagion Crisis

  • The White label-ATM does not have direct access to the settlements system. (like SBI or ICICI has access to RBI monitored NEFT online money transfers.)
  • Instead White label ATM is tied with a ‘sponsor-bank’. And the sponsor bank looks after the settlement. Sponsor bank loads and withdraws the cash from those “machines”. Example Federal Bank is the sponsor bank for Tata’s White label ATMs.
  • Contagion means a Bad condition in one institution leads to negative effects in the other institutes in the market.
  • Suppose few of Tata’s White label ATMs break down for xyz reason (hacking, staff negligence or whatever) and some clown starts baseless rumoring on facebook/twitter/whatsapp that Tata’s ATMs not working because federal bank has stopped supplying cash.
  • Another clown then starts rumor mongering that Federal Bank is about to collapse because of NPAs and hence not honoring its obligation to Tata.

Result: Fed.Bank account holders panic and line up at other ATMs (sponsored or owned by other banks) to pull out their money = these type of “runs” destabilize the banking system. Extreme cases lead to situation like Cyprus-Banking crisis.

Mock Questions

  1. Who among the following can operate White label ATMs?
    1. Nationalized Banks
    2. Scheduled Commercial Banks
    3. Retail Banks
    4. None of above.
  2. What is “Indicash” ATM?
    1. Brown label ATM chain under Indus Bank
    2. Brown label ATM chain under Bank of India.
    3. White label ATM chain owned and operated by Tata
    4. White label ATM chain owned and operated by Prizm payments
  3. Correct statements about White label ATMs
    1. RBI permits non-bank entities to setup White Label ATMs under Banking regulation Act.
    2. Only Non-Banking financial companies with 15 years of experience can open White label ATMs.
    3. In case of failed transaction, the complaint is automatically sent to Banking Ombudsman.
    4. None of above.
  4. Correct statements about White label ATMs
    1. Company has to open 2/3rd of its ATM in areas having tier 3 to tier 6 level population.
    2. Before opening such booths in rural areas, the company has to get permission from NABARD.
    3. Both 1 and 2
    4. Neither 1 nor 2
  5. Incorrect statements about White label ATMs
    1. The operator company is required to maintain SLR and CRR reserves similar to a scheduled commercial bank.
    2. To prevent conflict of interest, RBI has forbidden White label companies from providing Value added services in such booths.
    3. Both 1 and 2
    4. Neither 1 nor 2
  6. What is the role of a Sponsor bank in White label ATM system?
    1. provide maintanance and service to the equipment
    2. provide cash to the equipment
    3. both 1 and 2
    4. Neither 1 nor 2
  7. Suppose RBI rules require the company to open ATMs in Urban: Rural areas in the ratio of 5:9. If Muthoot Finance owns total 3500 ATMs, how many of them are located in the rural areas?
    1. 225
    2. 1250
    3. 2250
    4. None of above
  8. Suppose RBI rules require the company to open ATMs in Urban: Rural areas in the ratio of 1:1,at the end of the given year. In January 2014 Muthoot Finance owns total 3000 ATMs but its rural:urban ratio is 8:7. So, by 31st December 2014, How many new rural ATMs should they open to comply with RBI’s rules?
    1. 400
    2. 300
    3. 200
    4. none of above
  9. The ratio of Indicash White label ATMs in urban: rural areas is 4:5. If Indiacash opened 360 new ATMs each in both urban and rural areas, then ratio will be 7:8. So, originally, how many ATMs did Indicash have in rural areas?
    1. 640
    2. 560
    3. 600
    4. None of Above
  10. The ratio of Indicash’s urban:rural ATMs is 3:2 and total number of ATMs is 600. If Indicash wants to change this ratio to 7:3, what should it do?
    1. Add 200 ATMs in rural area
    2. Add 200 ATMs in urban area
    3. Add 200 ATMs each in both rural and urban areas
    4. None of above

  1. Despites certain risks and limitations, the White label ATM has a potential role in financial inclusion. Elaborate. (10m | 200 words)
  2. Define White label ATM. What are its features, advantages and limitations? (10m | 200 words)
  3. What are the differences between White label and Brown Label ATM? (5m | 100 words)

Visit Mrunal.org/Economy For more on Economy.

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So far 64 Comments posted

  1. vishal kumar

    thanks sir.

  2. P_G

    1)d 2)c 3)d 4)a 5)c 6)b 7)c 8)c 9)c 10)c
    Thanks for providing question from csat paper 2 point of view too.

    Can u elucidate why its called nested design.. little bit confused Mrunal?

  3. somit

    Excellent Mrunal Sir !!

  4. sailesh

    So normal bank ATMs are called green label ATMs ??

    1. Anurag

      They are called ‘Bank Owned ATMs’

  5. samir

    1d, 2c, 3d, 4a, 5c, 6b, 7a, 8c, 9d, 10b. Hope all are correct 🙂

    1. Pradeep

      7- answer is c. 9/14*3500= 2250

  6. Dr S k mishra

    A great presentation with lucid writing. Hats off to u sir.

  7. Anshuman Rai

    Great article as usual from you sir… so much thanx

    Please see the answers
    1 D 2 C
    3 D 4 A
    5 C 6 B
    7 C 8 D
    9 C 10 B

    1. shona

      how did yo find solution for 8 and 10

      1. Harikrishnan D

        If a ratio is a:b, you can find the base figure by formula, (actual total number)/(a+b). Then actual no of a = base figure*a. Now to shift it use appropriate steps. Like in 8:7 question, a+b = 15. Total is 3000. therefore base fig is 3000/15=200. now a=1600, b=1400. Adding 200 to b iplies a=1600 (no change), b=1600 (added 200). now a:b is 1:1.

        1. Deepak A

          Adding 200 to B implies – Adding 200 to urban areas not to rural.

          Question asks in Rural areas so either technically question statement has a typo or answer is D.

          What say HariKrishnan ?

          1. Pradip Kumar Dey

            I want site accusation for white Label ATM at west Bengal at SREI coy,Muthoot Fin,Vakrangee software,AGE coy, Also give address the above mention coy office at kolkata.
            Thanks & Regards
            Pradip Kumar dey

  8. harsh

    answer for 8th is d none
    check ratio its urban:rural then rural:urban
    200 atm should be open in ‘urban'(nd nt rural) for compliance with rbi norm of 1:1
    plz provide explanation too if u find any answer incorrect .
    Thankyou mrunal sir.

  9. priya

    Sir how value added services will bring commission to white ATM?

    1. Anurag

      They will charge commission for providing services. For example when we go to a mall and purchase something and make payment by debit/credit card, although our bill does not include commission but the shop owner has to pay commission (around 1.5% of bill value) to the electronic payment service provider.

  10. dhanjit choudhury

    whats nested design

  11. Dheeraj

    thank you so much sir 🙂

  12. JIGAR

    I think the Q no 8 is asking opening new ‘urban’ atms rather than rural atms

  13. gaurav

    Dear sir i failed to understand the concept and logic of sponsor bank. When bank itself going to upload cash and take care of dispute resolution /fund settlment then whats the role of non bank entity except providing funds for infra (it can be taken care by bank itself)

    1. Anurag

      Sponsor bank is not going to upload cash into the White Label ATMs, they will just provide cash to ATM operating company (for e.g. Tata). Providing cash is the least of the problems faced by banks while operating ATMs. The main problems are managing ATM machines as they have to be refilled by Cash frequently, repair as soon as possible and make other infrastructure arrangements.

      1. Ajit K Menon

        Hello Anurag,

        I have a slight difference of opinion on this.

        I consider it to be the prerogative of the Sponsor Bank to load the cash in those White label ATMs. Thereby ensuring that counterfeit/fake notes are not circulated in the system.


  14. Rubal

    Is answer of question 9 C or D. Please can any senior clarify

    1. vivek

      its c . it,s a simple question of ratio. just go through the chapter.let urban atms be 4x and rural be 5x . now we know if we add 360 to both urban and rural we get the ratio as 7:8. just equate. (4x+360)/(5x+360)=7/8. from this x=120.then put this x in rural atms i.e 5x=5*120=600.
      hope its clear to u.

  15. Vishnu Singh

    What is hybrid deposit?

  16. Dr. pavan

    how banks will reduce the operational cost, with Brown Label ATM (outsourcing) system.

  17. Abhishek

    If white labeled ATMs will not have it’s sponsor’s name, then how will the customer know that will his debit card will work with this ATM or not? If will have to insert card only to know that his ATM can not be entertained.

    1. rob

      White Label ATMs supports all kinds of debit cards. So, all ATM cards are entertained.

  18. Koushik Bisoyee

    can there be more than one sponsore bank for a WL ATM?Please explain more about relation of sponsore bank and WL atms?

    1. Vandana Verma

      I have a similar question. Can a single ATM be fed by more than one bank. For eg., if a single bak is unable to fulfil the cash requirement of an ATM, can I get the cash from other financial institution for the same ATM in part or full.

  19. vikash shahil

    thank u mrunal for presenting in such a easy language…..

  20. Sasikumar

    Very Nice Article Sir…

  21. Rinu

    I read that BMB ties up with SBI cards for roll out of credit cards to customers. what was that??
    Could you pls explain what it was about and what is this While label cards??

  22. Mission 2014 IAS

    MRunal Sir, tame ek vaat batavo…pela tame lakhiyo ke whitelable atm no koi pan sposer nathi anne pachi niichey tame sposer ni vaat karo cho!!..

    magaj me naa besi.

    beejo koi pan option tamara galat che.

  23. chennakesava

    thanks sirrrr

  24. balaji

    excuse me…i need explanation for Q,7 to 10.
    i’m confused in calculations…
    any one can explain…


    I AM A NEW GUY & commenting 1st time on ur article. Your site is really so much helpful for UPSC aspirants.
    MY ANSWERS:1)d 2)c 3)d 4)a 5)c 6)b 7)c 8)c 9)c 10)b
    I hope all are correct.

  26. Vishnu

    Thank u very much.

  27. Dc

    thanks for nice article.
    Sir plz provide ans. also
    so that we can cross check our answers.


    Sir ,what does white label atms business correspondent mean here ?

  29. Ashok Suthar

    Is it binding for a non-bank entity issuing White-label ATM to receive cash/money from a sponsor bank ? Can it not manage with its own cash-balances?

  30. Monali

    Dear seniors,
    Can any one explain in details about Brown lable ATM.

  31. Himanshu Tiwari

    Can white lebel ATM also have deposits?

  32. राजीव खंडेलवाल

    अगर WL ATM लॉस पर चल रहा हो, क्या वह अपना बिज़निस अपनी मर्जी से बंद कर सकता है या नहीं?

  33. hanmandlu

    i have shop in metpalli .and iwant to take white take atm

  34. Kaizer

    Till now i was only aware of Red label, Black label & Blue label…. lol 😉

  35. spatel

    I appreciate your efforts sir.You are a great academician and educationist of our times

  36. sandhya

    if anyone can say 10th question solution???plzzzz

    1. Karthik

      The given ratio is 3:2 for the purpose of solving lets make it as 9:6
      then the needed ratio is 7:3 similarly for the purpose of solving lets make it 14:6
      So, 9x+6x = 600
      => x=40
      also noprobs with the second term in the ratio since both are made equal i.e. 6
      the difference between the first terms is (14-9) = 5
      So, 5x = 5(40) = 200 and the change is in Urban…

  37. seema

    What kind of card need to use for withdrawal of money? Having ATM is compulsory?

    1. rob

      Any bank’s ATM card will work. Yes you should atleast have a ATM card.

  38. Pawan

    You do not leave any chance for any doubt. Could u provide examples for BLA in India (Brown Lbel ATM) Its really wonder ful explanation with Asli maall

  39. saurabh

    Please make marketing notes sir

  40. RM

    Ans for Q.3 should be A, as if he NBFC has to open 1 branch in urban area then simultaneously they have to open 2 branch in rural area
    means total say 3 branches (1 urban + 2 Rurual)
    Rural portion = 2/1+2 => 2/3 times of total branches.

  41. Rajkumar amane

    please i want information to ATM card in Marathi language

  42. Abhay

    whome to contact if i wish to rented Space for ATM.

    in Talegaon dabhade 410507.

  43. joydip

    sir can any one get franchise to White Label ATM? and how much invest ?

    1. vishal

      joydip u can get franchise in minimum cost under 3-4 lakh

  44. Shaikh Maheboob

    Hi sir,

    You ellaborated all these but I want to know that if at white labled atm 5 Transactions are free to costomer then what about commision of that wla operator.
    please explain anybody

  45. Sathish Kumar

    I would like to know if mobile recharges, domestic money transfer and utility bill payments are allowed in white label atms ?

  46. Umesh

    अगर WL ATM लॉस पर चल रहा हो, क्या वह अपना बिज़निस अपनी मर्जी से बंद कर सकता है या नहीं?

  47. Prince Sanghi

    Answer of question number 10 will be D
    1. As there are total 600 ATM in 3:2 urban Rural Ratio. So it means there are 360 ATM (600*3/5) in Urban while (600*2/5) 240 in Rural area.
    2. Now the New ratio should be 7:3 it means Urban will have (600*7/10)420 and Rural will have 180 ATM.
    3. Now see the difference between Urban (420-360)=80 it means there should be 80 more ATM in the Urban or 80 Less in rural.
    4. Answer should be 80 More in Urban or 80 Less in rural.
    5. no Option gets matches answer will be D



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