Gold loan non-banking financial company (NBFC) Muthoot Finance is planning to enter the white label ATMs (WLAs) space to consolidate its presence in financial services. It has applied to the Reserve Bank of India (RBI) for this.
White label ATMs are the ones owned and operated by non-banking entities. According to the current policy, only banks can establish and operate the ATMs.
Earlier this year, the central bank had decided to allow non-banks, whose net worth is at least Rs 100 crore, to set up and operate ATMs to increase the per capita availability and also increase their penetration in tier-III to tier-VI towns and villages.
In June, RBI had issued the detailed guidelines for WLAs.
Suresh Kumar, joint general manager of Muthoot Finance, told Business Standard, “We want to leverage our presence in rural markets, as RBI wants most WLAs in tier-II to tier-VI centres, and most of our branches are located in these centres.”
Kumar said WLAs are going to be the next big sector. “According to us, the banks may come out of the ATM space in India and we see a big business opportunities in WLAs, as there would be many other value-added services transacted through the ATMs,” he added.
RBI had proposed three schemes for companies which wished to apply for WLAs. In the first (Scheme A), a company has to set up at least 1,000 WLAs in the first year. In the second year, it should at least double the number of WLAs it set up in the first year. In the third year, the company is required to set up at least three times the WLAs it installed in the second year.
For every three WLAs installed in tier III-VI centres, a company can install one WLA in a tier-I or tier-II centre.
Muthoot has applied for the WLA licence under Scheme A.
In the second scheme (Scheme B), a company is required to set up a minimum 5,000 of WLAs a year for three years. In this scheme, the company can set up one WLA in tier-I or tier-II centre for every two WLAs installed in tier III-VI centres.
According to the last scheme (Scheme C), the company needs to set up a minimum of 25,000 WLAs in the first year and another 25,000 WLAs over the next two years. This scheme allows companies to set up one WLA in tier-I or tier-II for every WLA installed in tier III-VI centres.
Gold loan NBFCs have been under pressure ever since the RBI tightened the regulations for them. RBI had restricted loan to value (LTV) cap for the gold loans at 60 per cent of the value of the ornament. The banking regulator had also banned them to lend against primary gold and gold coins.
Further, the exposure ceiling for banks in a single gold loan NBFC was reduced to 7.5 per cent from 10 per cent of the banks’ capital funds.
Most gold loan NBFCs are scouting for the new avenues as their main business has been impacted by the RBIs guidelines.