Introduction

In 2012, the Reserve Bank of India (RBI) introduced White Label ATMs (WLAs) with an aim of financial inclusion, as it would enable non-bank operators to set up ATMs in under-banked areas and make them compete in the cash withdrawals. While the RBI’s May 1, 2025, interchange fee hike (₹19 for financial transactions) offers marginal revenue relief, it fails to dismantle the “upstream stranglehold” exerted by sponsor banks. WLA operators remain 100% dependent on these banks, which are also their direct downstream competitors for cash supply, vaulting, settlement, and routing via the National Financial Switch (NFS). This structural dependency creates a unique competition bottleneck where the provider of a critical input has every incentive to foreclose its downstream rivals.

Delineating Relevant Markets

To analyse the competition law issues in the WLA space, firstly, we need to define the relevant market, an essential part of the Competition Commission of India’s analysis under Section 3 and 4 of the Competition Act, 2002. For WLA operators, the issue is not only with ATMs, but also with the downstream service to end consumers and the upstream inputs essential to its operations. This view emphasises how structurally dependent WLAs are on the market power of the sponsor bank.

On the demand side, the relevant product market is easy to identify: services for withdrawing cash via ATMs. From the cardholder’s point of view, withdrawing cash from a bank-owned ATM is the same as using WLA as far as PIN verification, cash dispensation, and speed of transaction are concerned. Consumers can switch seamlessly depending on the location, as both of them are fully interoperable through the National Financial Switch (NFS)managed by National Payment Corporation of India (NPCI). Thus, there is evidence of high demand-side substitutability between these entities. Therefore, each entity finds itself in competition against the other in the same downstream market for per-transaction interchange fee revenue.

At the upstream level, the WLA have two considerable points of dependency which affect their bargaining position. First, it is related to cash supply and settlement. The RBI does not allow WLAs to access cash on their own. They are entirely dependent on the sponsor bank, and a monopolistic imbalance is created. As a result, WLAs have constrained levels of provider switching that can take place in response to delay or increasing costs. The second is switching related network services. Every WLA’s transaction passes through NPCI’s NFS, and thus, accessing this infrastructure is compulsory. Without connectivity to switching networks, ATMs cannot sustain.

SSNIP Test (Small but Significant Non-Transitory Increase in Price Test) confirms the understanding of the relevant market being defined in a narrow way. If the sponsor banks were to increase prices of settlement or cash handling facilities by 5-10%, WLA operators couldn’t run to the rivals because of the regulatory condition that requires reliance on a particular sponsor bank. Supply-side substitutability is also limited, since no new entrant can enter the market and offer the same services as existing ones in the existing regulatory framework. This confirms cash supply/settlement and switching services as two separate narrow markets- not amorphous “payments.” Broader definitions do not take into account the cash-only reality of WLAs and the RBI’s ban on independent sources of liquidity.

This institutional arrangement poses a case of obvious vertical foreclosure, similar to circumstances explored in MCX v. NSE, where control over the facilities of another provided constraints to another’s downstream competitors. The dominating sponsor bank can practically reduce the margins of WLA by increasing the cost of essential upstream services and hence strangling the downstream competitiveness. WLAs are price takers and are dependent on the entity who are also the direct competition of the ATM market. The sponsor bank has clear incentive to prioritise its proprietary networks through discriminatory supply delays. Accordingly, the narrowly defined market puts WLAs at risk of abuse.

Interchange Fees and Margin Squeeze

As per the information provided by RBI and NPCI, effective from 1st May, 2025, ATM Interchange fees have been revised to counter the increase in costs of WLA deployments, financial transactions involving cash transactions have increased to Rs. 19 from Rs. 17, and non-financial transactions like balance enquires to Rs. 7 from Rs.6, furthermore, the maximum permissible customer surcharges beyond the mandatory free usage limit increased to Rs. 23 from Rs.21.

These hikes improve the revenue ceilings for WLA operators; however, it becomes precarious because of the potential of the sponsor banks located in the upstream market to increase the upstream costs using predatory pricing. Whereas these WLA operators require a minimum of Rs. 15 to 18 per transaction as their costs (cash handling, maintenance). Since these Sponsor banks equally compete with them in the downstream market, the cash withdrawal market can increase their fees, reducing the WLA operators’ margins to meagre amounts or no profit at all.

This is in clear violation of Section 4(2)(a)(ii) of the Competition Act, which prohibits dominant firms from abusing their position by unfairly preventing the flow of the market or by disrupting the production/supply conditions. This provision highlights the abuses by margins squeeze, wherein a firm is dominant in a vertically integrated market and exploits using its control over the upstream power to thwart or foreclose its competitors in the downstream market.

The apex court discussed this framework in the case of CCI v. Schott Glass India Pvt. Ltd., 2025 used the effect-based analysis given in Konkurrensverket v. TeliaSonera Sverige AB (CJEU, 2011):

(1) upstream/ downstream dominance;

(2) inadequate wholesale and retail spread-offering equally efficient competitors (EEC);

(3) anticompetitive effects.

Sponsor banks were dominant in the upstream market since the RBI gave them power exclusively over the downstream ATMs. Post-2025 fee increase, upstream costs (~Rs. 18) will be more than Rs. 19-23 interchange revenue, causing a margin squeeze a la TeliaSonera – Rivals can’t survive despite “fair” downstream pricing. RBI’s rural density targets are yet to be met as WLAs battle in under-banked areas, caught in the sponsor bank pricing power.

A similar scenario of the WLA was there in the case of Deutsche Telekom AG. v. Commission (ECJ, 2010), where unsustainable broadband wholesale-retail spreads were found to be abusive irrespective of the profitability for the dominant firm itself. In India’s CCI, Together We Fight Society Vs. Apple Inc. & Another. Similarly, scrutinised App store fees, by compressing the input and output based disparities as the abuse of dominance u/s 4 of the Competition Act, 2002.

Access to Cash as an Essential Needed Facility

The RBI mandates require WLA operators to source liquidity exclusively from the sponsor bank, hence this creates a structural dependency. This triggers the Essential Facility Doctrine under Section 4 of the Competition Act: cash is indispensable, non-replicable element required for ATM operations. Therefore, cash must be shared by sponsor banks on fair terms to prevent WLA from being excluded from cash withdrawal services.

The CCI has distilled this to a four-part test, and this was reflected in decisions like Arshiya Rail Infrastructure Ltd. Vs. Ministry of Railways. Applying this test to the issue of access to cash for WLA operators reflects the fact that, with the current regime, dependency is structural.

First, replication is not legally allowed, since, unlike rail terminals, which can independently source cash, WLAs cannot (RBI restricts this). Second, sponsor banks already have the infrastructure in place to offer their own network services, making access to WLAs technically feasible. Third, if WLAs are denied access, the competitive harm to the sponsor banks would be substantial, as any denied access to a “cashed-out” ATM will cause loss of revenue and potentially lead to RBI penalising them. The RBI has stated that it will impose penalties on any bank with more than ten hours of monthly downtime. As a result, sponsor banks may be incentivised to prioritise their own proprietary ATMs when there is cash shortage at a WLA. Finally, under Section 4(2)(c), Prohibiting access and price discrimination, banks offering preferential cash to bank sponsors or other verticals where it offers preferential treatment create vertical non-price squeeze under Section 4(2)(a)(i); therefore, banks must be reviewed by CCI.

Similarly, in Shamsher Kataria v. Honda Siel Cars India Ltd., the CCI found that anti-competitive behavior exists where spare parts were held as essential input. In the case of the ATM ecosystem, cash assumes the same function as the essential input operation needed to provide services.

Conclusion

Sponsor banks’ ability to control liquidity upstream and switch networks makes WLA operators captive price takers. Vertical foreclosure of WLA operators through margin squeezes and denial of essential facilities is contrary to the RBI’s financial inclusion mandate. The CCI must intervene to ensure that all operational WLA operators receive the same access and pricing, to ensure that the dominant banks cannot use their upstream market power to inhibit downstream WLA operator innovation. WLA operators need active competition and access, as opposed to structural dependence, in order to achieve financial inclusion.