M-Banking in India - Regulations and Rationale : K. C. Chakrabarty
M-Banking in India - Regulations and Rationale : K. C. Chakrabarty
M-Banking in India - Regulations and Rationale : K. C. Chakrabarty
Mobile as a Medium
3. In this context, the question that often gets debated is: how and why is a mobile device the most appropriate delivery channel of nancial services? Besides the technological capability to transmit nancial information in an efcient, secure and costeffective manner enabled by development of mobilebased applications for banking, the most signicant fact about this idea is the ubiquity of the mobile phones.
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Address by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India at International Banking Summit on Regulation of Cross-Border Mobile Payments and Regional Financial Integration at Mumbai on March 29, 2012. Assistance provided by Shri K Sivaraman and Ms. Radha Somakumar in preparation of this address is gratefully acknowledged.
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were taken way back in October, 2008. But the Reserve Bank consciously opted for a bank-led model although our approach remains technology-neutral. Mobile phones as a delivery channel have a great potential if the security and cost aspects are addressed for it has to serve a large number of transactions that are small in size. It has to be remembered that use of mobile for banking in nancial inclusion cannot become a viable proposition on a standalone basis if the purpose is to achieve meaningful nancial inclusion. To make it viable and attract volumes, it has to be provided as a package along with other products and services. This can be achieved only by entities that can provide add-on services like emergency and entrepreneurial credit, saving facilities, other products and services such as insurance, besides remittances. This is where a mainstream regulated entity like a bank ts in. True, some of these alternatives are being provided by a few NBFCs but their scale and reach are not comparable with banks. They can serve niche markets but are not viable in the long run. But, they indeed will facilitate nancial inclusion. So, the Indian model will remain a bank-led model with banks partnering MSPs (mobile service providers) and other entities to achieve the national goal of inclusive growth. In our endeavour to enable enhancements in mobile banking both in terms of the nature of services offered and the value of transactions to be permitted under mobile banking, we have been in constant dialogue with the stakeholders and intervened to liberalise the mobile banking guidelines in a phased manner.
money transfer guidelines have been issued in October 2011. Remittance from a bank account for cash pay-out to the beneciary not having a bank account at an ATM/ BC outlet has also been facilitated up to `10,000/- per transaction subject to a monthly cap of `25,000/- per beneciary with the remitting bank obtaining only the full name and address of the beneciary. Similarly, cash pay-in facility has been permitted up to `5,000/- per transaction subject to a monthly cap of `25,000/- per remitter for transfer of funds to a bank account. Remitter has to provide only minimum details (name and address). Bank need not take any document or proof of address. 7. The interbank mobile payment services (IMPS) operated by the National Payments Corporation of India (NPCI) with the approval of the Reserve Bank has enhanced the efciency of mobile banking by enabling real time transfer of funds between bank accounts and providing a centralised inter-operable interbank settlement service for mobile banking transactions with conrmation features.
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It is evident that mobile phones have reached more households than basic banking services. Banks have not really made a signicant penetration even among their existing customers to extend mobile
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banking services. However, for me, the most important concern is that there is a signicant percentage of nancially excluded population and the potential of the mobile phone to extend them nancial services is still to be tapped. 9. The Reserve Bank has always been conscious of the need to bring every citizen of the country within the ambit of the banking system. Appreciating the difculties of banks to viably operate bank branches in every village, we had permitted them to appoint business correspondents (BCs) to address this. On demand from the industry, we have also permitted for profit companies to be appointed as Business Correspondents, which would enable a healthy fusion of the expertise of banks and the communications and agency network of non-banks, specially the MSPs. Though partnerships between banks and MSPs are happening, the pace is far too slow and the process needs to be expedited.
of the Payment and Settlement Systems Act, 2007. The Act itself came into force from August 2008 and as mentioned earlier, the rst guidelines on e-money were introduced in April 2009, and since then they have been liberalised in a signicant way. We have allowed issue of prepaid instruments up to `10,000 for exclusive use for purchase of travel tickets without the need for KYC. It must, however, be remembered that there are certain statutory requirements under the Prevention of Money Laundering Act which need to be met. However, within the existing statute, the Bank is constantly reviewing the position to identify the areas which impair the growth of e-money to initiate remedial measures. We have been on record that e-money is a more secure way of payments and needs to be promoted to ensure that our objectives of moving towards a cash-less society.
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11. As you know, e-money or the prepaid payment instruments, whether in the e-wallets, m-wallets, prepaid cards or paper coupons, have been brought under regulation for the rst time with the enactment
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(ii) who controls the transactions? Has there been any worthwhile attempt to resolve them in a mature way? I would urge upon the banks and MSPs to get their acts together very quickly. On behalf of the Reserve Bank let me assure you that we stand committed to the success of this collaboration and would remove all genuine obstacles!
and thus nancial inclusion. It has the potential but the security and cost aspects have to be addressed. The medium of mobile has to sub-serve smaller transactions and must become cheaper. The Reserve Bank has, for well considered reasons, opted for a bank-led model as it is a complete model for delivery of a wide range of services. Just as you cannot have tele-medicine without a doctor, you cannot have mobile banking without a bank! The BC model would help to complement mobile banking, as customers need to approach BCs/ATMs only for hard currency requirements and conduct other banking transactions from anywhere from their mobile phones, provided of course, there are no teleconnectivity issues! As mentioned earlier, it is the social responsibility of everyone, who has the resources and the power, to contribute to the success of nancial inclusion. While we have the guidelines to M-power nancial services, it is necessary for us, the Reserve Bank, banks and the MSPs in particular, to take this forward in the fourth gear by convincing the common man not only on the power of the mobile phone for doing nancial transactions but also the safety and security aspects of mobile banking, to provide a level of comfort. I believe there are success stories of mobile banking in states like Bihar, thanks to the initiatives of the certain NGOs and banks, which has enabled not only nancial inclusion but made less literate people mobile banking-savvy. This needs to be emulated through adequate publicity and education to achieve M-powerment in a signicant way. I thank you all for giving me this opportunity to address this august gathering. I hope some of the issues that I have raised will be discussed in this Summit and some solutions found. I wish you all the best.
Conclusion
16. Before I conclude, let me reiterate that the mobile phone is a potent tool to facilitate nancial services
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