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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
[Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk
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What is White label-ATM? Whats the difference between Brown label vs White label ATM? Stakeholder/Players in White label ATM game? Why do we need White Label ATM? How does White Label ATM help in financial inclusion? Facilities @White label ATM? Where does the Commission come? White label ATM: Challenges/Limitations/Problems Mock Questions
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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
operational cost, so they came up Brown Label ATM (outsourcing) system. So in a way, the evolution is: (Banks own ATM) =>(Brown Label) => (white label)
(non-bank) White Label Rents the place, looks after maintenance and servicing of the ATM machine. company Loads the cash in those White label ATMs. This also ensures Sponsor counterfeit/fake currency notes are not circulated through white bank 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.
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.
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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
Metropolitan Tier 1 Urban Tier 2 Tier Semi-Urban 3 Tier 4 Tier 5 Rural Tier 6
10 lakh and above if company wants to Setup ONE ATM 1 lakh and above here, 50,000 to 99,999 20,000 to 49,999 10,000 to 19,999 Then, company must install TWO ATMs here. 5,000 to 9,999 Less 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.
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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
2. If you used card on other banks 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.)
White label Company. 3. White label company cannot directly charge money on you. (RBI rules). 4. Although it doesnt 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.
Nested Design
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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
RBI appointed Nachiket Mor Committee on financial services, talks about this limitation.
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 Tatas White label ATMs. Mohan Ok so whats the problem? Nachi Nested Design= contagion risk. Contagion = Bad condition in one institution leads to negative effects in the other institutes in the market. Suppose few of Tatas White label ATMs break down for xyz reason (hacking, staff negligence or whatever) and some clown starts baseless rumoring on facebook/twitter/whatsapp that Tatas 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. Mohan But dont the banks have CRR and SLR to arrange cash in such emergency situations? Yes they have. But with nested design, theyre exposing themselves to
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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
additional contagion-risk from other banks/White-label ATM companies. Especially when White label ATM company grows too large in very short time and sponsor bank cannot foresee the cash requirements. Mohan Then whats your recommendation? Nachi White label ATM companies should be directly linked to settlement system, without sponsor banks. RBI should allow White Label Banking Business Correspondent agents. [Same like earlier BC, but they can work with multiple banks at the back-end.] Potential candidates= NBFCs, mobile phone companies, consumer goods companies, the post office system, existing corporate BCs, and milk/agri./sugar etc. real sector cooperatives.
Nachi
Mock Questions
1. Who among the following can operate White label ATMs? A. Nationalized Banks B. Scheduled Commercial Banks C. Retail Banks D. None of above. 2. What is Indicash ATM? A. Brown label ATM chain under Indus Bank B. Brown label ATM chain under Bank of India. C. White label ATM chain owned and operated by Tata D. White label ATM chain owned and operated by Prizm payments 3. Correct statements about White label ATMs A. RBI permits non-bank entities to setup White Label ATMs under Banking regulation Act. B. Only Non-Banking financial companies with 15 years of experience can open White label ATMs. C. In case of failed transaction, the complaint is automatically sent to Banking Ombudsman. D. None of above. 4. Correct statements about White label ATMs A. Company has to open 2/3rd of its ATM in areas having tier 3 to tier 6 level population. B. Before opening such booths in rural areas, the company has to get permission from NABARD. C. Both 1 and 2 D. Neither 1 nor 2 5. Incorrect statements about White label ATMs A. The operator company is required to maintain SLR and CRR reserves similar to a scheduled commercial bank. B. To prevent conflict of interest, RBI has forbidden White label companies from providing Value added services in such booths.
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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
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C. Both 1 and 2 D. Neither 1 nor 2 What is the role of a Sponsor bank in White label ATM system? A. provide maintanance and service to the equipment B. provide cash to the equipment C. both 1 and 2 D. Neither 1 nor 2 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? A. 225 B. 1250 C. 2250 D. None of above 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 RBIs rules? A. 400 B. 300 C. 200 D. none of above 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? A. 640 B. 560 C. 600 D. None of Above The ratio of Indicashs 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? A. Add 200 ATMs in rural area B. Add 200 ATMs in urban area C. Add 200 ATMs each in both rural and urban areas D. None of above
Descriptive: 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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Mrunal [Banking] White Label ATM: Meaning, Features, Advantages, Limitations, Financial Inclusion, Nested Design, Contagion Risk Print
URL to article: http://mrunal.org/2014/01/banking-white-label-atm-meaningfeatures-advantages-limitations-financial-inclusion-nested-design-contagionrisk.html Posted By Mrunal On 14/01/2014 @ 20:33 In the category Economy
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