Outlets of telecom companies such as Airtel and Vodafone may soon double as bank kiosks for financial services like funds transfer or bill payment, especially in parts of the country where there are very few banks or none at all.
The government has set up a high-level inter-ministerial group to consider introducing a mobile-based model without links to bank accounts for delivery of basic financial services. This would allow customers to transfer money to a distant relative or pay shopping bills at the press of a button.
The group would define the type of transaction to be allowed, quantum of financial limits, guarantee to be offered by airtime vendors, eligibility of agencies involved, role and accountability of service providers and interoperability among them, interface with the Reserve Bank of India, security of deposits and transactions, and geographical coverage of services including borders and sensitive areas.
The group, to be set up under the IT ministry that mooted the proposal, would comprise secretaries or top officials of the Ministry of Home Affairs, telecom, financial services, posts, rural development, Planning Commission, UIDAI, and representatives of telecom regulator TRAI and RBI. It would work out the norms and define the role of various stakeholders in the report to be submitted to cabinet secretary in January.
The IT ministry, in a presentation to the cabinet secretary, suggested that low-value transactions should be allowed through mobile phones with little or no involvement of banks. It also proposed future two-way links between the UID Authority and mobile operators. It said the maximum permissible limit of Rs 5,000 should also be increased further to serve the purpose of financial inclusion.
A finance ministry official said, "RBI is comfortable relaxing the cap, but it is not in favour of providing financial services without links to bank accounts. It is of the view that this may lead to security problems as Know Your Customer (KYC) norms of banks are more stringent than mobile operators."
A top official in the IT ministry said, "KYC norms can be enhanced if necessary. The technology is already there and regulatory barriers should not prevent people from getting the convenient, fastest and cheapest mode of accessing financial services. It will help curb money laundering as all transactions through this channel will be fully traceable. This will also bring down operational costs for banks."
The model being proposed is similar to M-PESA in Kenya, which enables users to complete basic banking transactions without visiting a bank branch.
Customers can deposit, withdraw and transfer money from a network of airtime resellers and retail outlets acting as banking agents. Of about 31 million people in Kenya, 5.8 million use the service. The model has been replicated in Afghanistan and Tanzania, while Egypt and South Africa are also considering it.
RBI came out with "mobile wallet" guidelines in August 2009, which allow mobile phone users to deposit with telecom operators up to Rs 5,000 that can be used for merchant transactions. Some companies are piloting the service under whichthe recipient will be able to collect the money from an outlet of the mobile operator by showing a transaction authorisation code received from the sender.
There are about 400 million bank account holders in India, whereas the number of mobile phone subscribers has reached 490 million with an addition of 10-12 million new users every month. Of these 490 million subscribers added in the last 14 years, about 50 per cent do not have a bank account.
Mobile financial services will help 95 per cent of the 6.4 lakh villages in India that do not have a bank account. In December last year, Vodafone, which is running M-Pesa in Kenya for last 18 months, had proposed to the department of posts to facilitate mobile financial transactions through its post offices. It had asked for a share of revenue from the transactions processed through this system.
