Central govt allows automatic FDI route for white label ATMs

Central government approval will not be required now for foreign direct investment ( FDI) in ATMs, set up by non- banking entities. The move would boost financial inclusion programme of the government and facilitate funding of infrastructure in this business.

The proposal, cleared by the Cabinet on Wednesday, is aimed at increasing financial inclusion since such ATMs, called white label, are generally set up in smaller cities, towns and rural areas.

“This decision will ease and expedite foreign investment inflows in the activity and thus, give fillip to the government’s effort to promote financial inclusion in the country, including the Pradhan Mantri Jan Dhan Yojana,” an official statement said.

It is expected that consequent to ease of investing in India, adequate funds would be available in white- label ATM operations, it said.

“This would help in the government’s objective of enhancing ATM networks in semiurban and rural areas,” the statement said, adding that participation of foreign investors in the sector will contribute to furthering financial inclusion.

White- label ATM operators in the country include Srei Infrastructure Finance Ltd, Muthoot Finance and Vakrangee Software. In the past these ATM operations were struggling to be viable operations.

“FDI will definitely help to improve the funding to the capital intensive WLA infrastructure business. Muthoot Finance is seeing this as a boost to the WLA business due to more long term funds flowing to this business,” said George Alexander Muthoot, managing director, Muthoot Finance.

Last year RBI had allowed usage of international credit, debit and prepaid cards in these ATMs in a bid to make it a viable project. However, it was still felt that this was not sufficient to push the rollout of ATMs from the slow lane.

“With the anticipated growth in ATMs in India through this reform, it is very clear that setting up and operating ATMs no longer remains the prerogative of just the existing banks. Even the private non- banking companies can now boast of not only having their own ATMs but also making a positive impact on the financial services system in India. Let us wait and watch the real implementation challenges of this very thoughtful reform,” said Khushroo Panthaky, partner, Walker Chandiok and Company.

Business Standard, New Delhi, 10th Sept. 2015