RBI permitted CBS-enabled Cooperative Banks to issue ATM cards in tie-up with a sponsor bank

Reserve Bank of India (RBI) on 16 July 2015 permitted Cooperative Banks with Core Banking Solution (CBS) to issue ATM cards/ATM-cum-debit cards in tie with a sponsor banks.

The decision was taken by the RBI in an attempt to move towards a less-cash economy and with an aim to inculcate the habit of using electronic payment channels among bank customers.

Further, these cooperative banks by virtue of being a sub-member of National Financial Switch (NFS) are required to fulfil the risk management requirements prescribed by the sponsor bank and meet expenses devolving on them under the agreement with the sponsor bank.

Also, banks should set up their own arrangement for issuing cards, authorization of cards and customer support/redressal mechanism and ensure to provide uninterrupted services to their customers.

The RBI took the decision after it received representations from cooperative banks not having their own ATMs and sought permission to issue ATM-cum-debit cards to their customers in tie-up with banks having their own ATM network.

After examining the representations in light of requirement to become a direct member or a sub-member of the NFS for carrying out such transactions, the RBI arrived at this decision.

Following are the criteria to become a sub-member of NFS:

• Core Banking Solution (CBS) fully implemented
• Licence for conducting banking business
• Introduction from sponsor bank (a bank having ATM network connectivity)
• Connectivity with National Payment Corporation of India (NPCI)

The decision is in addition to the earlier decision of the RBI taken on 16 April 2015 to allow State Cooperative Banks (StCBs) to install offsite/ mobile ATMs as per their need and potential in their area of operation.

However, they were allowed to install mobile ATMs only with prior permission of the RBI and subject to satisfying the following criteria:

• CRAR not being less than 9 per cent
• No default in maintenance of CRR/SLR during the preceding financial year
• Net NPA being less than 5 per cent
• The bank should have a track record of regulatory compliance and no monetary penalty should have been imposed on the bank on account of violation of RBI            directives/guidelines during last two financial years

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