@Leisure - Vol-37 | srei
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@Leisure - Vol-37


What you need to know about white and brown label ATMs

It is rare not to be familiar with an ATM in this day and age; they have become an integral part of daily life. However, there are new developments taking place in the ATM arena. While bank ATMs are the norm, now there are ATMs being installed by non-banking entities as well. Let us have a closer look at how ATMs are placed in India.

Brown Label ATMs

While banks can operate and install their own ATMs, there are also other types of ATMs that are operated and installed by a cash management service. This service provider will connect to an existing banking network provided by a sponsor bank. This way banks can brand ATMs in their colours but they do not really have to bear the costs of operations and installation.

White Label ATMs

White label ATMs are owned by non-banking entities. Customers of any bank can use this type of ATM to withdraw cash. These types of ATMs are not branded in the sponsor bank's colours and are usually found in places like Tier III and IV cities where installation of bank ATMs is non-feasible for one reason or another.

Brown vs. White Label ATMs

There are a number of differences between Brown and White Label ATMs:

  • Operating entity: While brown label ATMs are run and maintained by a cash management service on behalf of a bank, white label ATMs are owned by a non-banking entity such as Srei.
  • Placement: In India, a brown label ATM may be found at any location while white label ATMs are only found in Tier III and IV cities.
  • Fee: You may or may not be charged a fee by your bank when you use a brown label ATM; as an example, if you use your own bank's ATM, you may not have to pay a fee, but if you use another bank's ATM, you will get only 3 free transactions per month if you are a resident in a metro city. White label ATM transactions are always chargeable.
  • Deposits: It may be possible to make deposits at a brown label ATM but a white label ATM can only be used for making withdrawals.

White label ATMs are the latest development in the ATM space in India. The introduction of white label ATMs will provide banking connectivity to areas of India where it has been traditionally difficult for banks to provide services. Srei is one of the white label ATM service providers in the country and is proud to be able to offer its services to the masses.


Srei's advantages being an IFC

Srei has been recognized as an Infrastructure Finance Company (IFC). Srei received its IFC status in March 2011. The Reserve Bank of India (RBI) has recognized Srei as an IFC with the overall classification of a Non-Banking Finance Company (NBFC). Several criteria have to be met before a company can gain the IFC status. These include:

  • Having a minimum of 75 per cent of the company's assets deployed in infrastructure loans
  • Net owned funds of at least Rs 300 crore
  • Credit rating of at least "A" or equivalent from a recognized credit rating agency
  • Capital to Risk (weighted) Assets Ratio of 15 per cent (with a minimum Tier-1 capital of 10 per cent)

There are a number of benefits of being an IFC; these benefits can also extend to infrastructure sector borrowers:

  • Flexibility: IFCs have more flexibility in accessing debt and extending loans to the infrastructure sector. As an example, an IFC can provide loans more than 10 per cent of its funds to a single borrower, while banks are not allowed to do so.
  • Access to credit: IFCs are allowed to access a higher level of bank credit; bank borrowing can make up to 20 per cent of the bank's net worth compared with 15 per cent for an NBFC, which is not an IFC.
  • ECB access: IFCs are allowed to raise funds from External Commercial Borrowings (ECBs). An IFC can raise up to 75% of owned funds under automatic route from ECBs. ECBs have lower costs attached to them compared with borrowing money within the country. These also allow for diversification of the borrowing base.
  • Better rated: The cost of borrowing from banks is lower for IFCs compared with NBFCs. While the risk-weights for NBFCs are 100 per cent, they are lower at 30 per cent for IFCs with a credit rating of AA.

The IFC status is important for a company like Srei. It allows the company to raise more money for a longer duration of time and at a reduced cost. This, in turn, is beneficial to borrowers in the crucial infrastructure space.


Changes needed to develop the Indian bond markets

The Indian debt markets have yet to develop the depth and maturity as compared to debt markets in some countries.

Government securities rule the roost:

In the Indian context, government securities are the dominant form of debt preferred by investors. Corporate bonds still have a minority role. By one estimate, corporate bonds are only one-fifth of the equity markets in India and the penetration of corporate bonds measured by the amount outstanding to the GDP was merely 18 per cent as of 2016.

Challenges of bond market growth:

There are several factors that are in the way of bond market growth in India. According to a report titled - Giving debt its due - by Assocham and Crisil, there are structural constraints such as dominance of banks in lending, risk appetite of investors which is limited to higher rated bonds, regulatory arbitrage between loans and bonds, and prescriptive regulator limits on investment. Retail participation in bonds is also weak in India despite the fact that 47 per cent of annual household savings go into bank deposits, which are debt investments at large.

Changes needed:The Assocham-Crisil report has advocated three changes that could help develop the debt markets in India. Firstly, they advocate larger institutional investment in corporate bonds. This means more mutual funds, pension funds and insurance companies putting in funds into corporate debt. Secondly, it is important that companies explore other sources of funds instead of turning to banks all the time. A move to bond markets for raising finances would go a long way in the development of debt markets. Finally, it is important to put into place policies and infrastructure that will help both issuers and investors. This means putting in place a team of experts or a department at the Ministry of Finance for the development of the corporate bond market.

The debt market has the potential to be a game changer for India. Increased and easy participation of both corporates and investors would help raise funds that can be pushed towards the future growth of the country. The sooner we can build our debt markets, the better it is for all stakeholders.


Buddy Jokes

Jokes / Quotes

"Our incomes are like our shoes; if too small, they gall and pinch us; but if too large, they cause us to stumble and to trip." - by John Locke

A man went to a Swiss bank holding tight a briefcase full of money and whispered to the banker, "I want to open a bank account and deposit Rs. 1 crore."
The Swiss banker replied, "Sir, you can say it louder. In our bank, poverty is no crime."

"To understand someone, find out how he spends his money."- Mason Cooley

A fine is a tax for doing wrong. A tax is a fine for doing well.


Buddy Quiz

1) A White Label ATM is found in Tier ........ and Tier ....... cities
a. III and IV
b. II and III
c. I and II

2) In order to be an IFC, ....... per cent of a company's assets should be deployed in infrastructure loans.
a. 65
b. 75
c. 25

3) In India, ................... Securities are the dominant type of bonds.
a. Government
b. Corporate
c. Cooperative

4) Credit rating of at least .................... is required from a credit rating agency to be deemed an IFC.
a. B
b. A
c. AA

5) Corporate bonds account for only .............. of the equity market in India.
a. 1/4th
b. 1/6th
c. 1/5th

Answer:1-a; 2-b; 3-a; 4-b; 5-c