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White label ATMs and Islamic Banking

What are white label ATMs?

White labeled ATMs are those that do not have label of any Bank.
These machines are owned and operated by non-bank entities providing services to
all bank customers it is already there in Canada and some European countries.

Why in news?
In 2012 RBI had allowed corporate to set up white label ATMs to increase the
penetration of ATMs in several areas of the country (tier3-tier6cities)
Tatas have rolled out the first ever white label ATMs network under the brand name
The first INDICASH ATM was inaugurated in chandrapada a village in Thane district
of Maharashtra.
Tata communications payment solutions (TCPS) has got license from RBI to launch
white labeled ATMs under scheme B.
In Scheme B WLA licensee has to setup a minimum of 5000/- ATMs per year for 3
years. Two for tier III to tier VI cities and one for tier I- tier II cities.
Sponsor Bank is the Bank which will supply money to the WLA licensee.
Muthoot finance a gold loan company has also received in principal approved from
RBI to setup the WLAs.

Rural people and small town people get benefited.
More penetration in ATM services is possible.

Islamic Banking
What is Islamic Banking?
Financial institution following the principles of Islamic finance it is also known as

Sharia based NBFC (Non Banking Financial Corporation)

Why in News?
Recently the Kerala Government has got a RBI nod for Islamic Banking.
What exactly is Islamic Banking?
Under Islamic Banking norms depositors do not get interest on deposits similarly.
The Banks cannot charge interest to its borrowers.
Banks can invest the money but keep off taboo areas like liquor, tobacco and
gambling or speculation.

Similarly Islamic Banks also cannot invest in bonds treasury bills and commercial
papers or lend to finance inventory or projects for interest
The RBI has clarified that the permission is not for commercial Banking but only
for a NBFC
Kerala a remittance- driven economy has been requesting the RBI to allow
Islamic Banking for nearly a decade
It now becomes the first state to start a Sharia based NBFC
It has been reported that close to Rs 50,000 crore of interest money is lying
unclaimed with Kerala Banks most of which is remittance from Kerala muslims
working in the gulf and other foreign countries, as under Sharia they cannot claim

interest from Banks.

Financing of these Banks are restricted to useful goods and services and refrain
from financing alcoholic beverages and tobacco or morally unacceptable services.
In Islamic banks do not consider only the credit worthiness and interest rate as
standards instead they apply Islamic moral/ethical criteria in provision of
They deal with their customers on investment grounds rather than predetermined
fixed interest rates.
Islamic Banks eliminate the barrier between those who save and those who invest
and bring them closer to the real market.

Lack of Islamic Banking professionals
Lack of shariah scholars who have specialized in Islamic economics

For this process to be successful the Shariah boards of our Islamic Banks should absorb
Islamic scholars based on their technical expertise rather than their popularity.


Manoj Hegde