New Delhi: The government has approved 100% foreign direct investment (FDI) under the automatic route for non-bank entities that operate cash machines subject to certain conditions in a bid to boost financial inclusion in the country.

A non-bank entity that aims to set up the so-called white label automated teller machine (WLA) should have a net worth ( the latest audited balance sheet) of at least Rs100 crore and the should keep that amount at all time.

In case the entity is also engaged in non-banking financial activity, then the FDI in the company which is setting up the WLA should comply with the minimum capitalisation norms for foreign investment in such activities.

WLA operators in the country include Tata Communications Payment Solutions, a unit of Tata Communications Ltd, Prizm Payment Services and Muthoot Finance.

Till date foreign investment in non-banking ATMs was allowed only through government approval route, which had led to project delays.

The central bank first issued draft guidelines on WLAs on 14 February 2012, inviting comments and suggestions. In June 2012, it released the final guidelines allowing non-bank entities to set up WLAs.

These guidelines aimed to increase the footprint of ATMs in semi-urban and rural areas, where ATM penetration is low. These entities have a mandate to deploy 67% of ATMs in rural locations (tier III-VI) and 33% in urban locations (tier I and II cities).

Through this decision, the government wants to strengthen the ATM network in semi-urban and rural areas (Tier III and IV cities) and also promote financial inclusion programmes such as Pradhan Mantri Jan Dhan Yojana.

The Reserve Bank of India recently doubled the limit for cash withdrawal at point-of-sale in tier III to VI cities from Rs1,000 to Rs2,000 a day. The facility will be available for debit cards and open system prepaid cards issued only by banks. The limit remains unchanged at Rs1,000 per day for tier I and II cities.

WLAs are in use in many countries, but its penetration in India has been slow, with the ATMs per million of population remaining far behind that in the US and China.

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