The government plans to expand mobile banking services to benefit the common man. Aimed at those who are not covered by the banking channels, mobile banking would help them carry out banking transactions like deposits, withdrawals and payments, without a conventional bank account or a credit/debit card.
Sources say mobile transactions are ought to be cheaper than conventional banking and you can carry out transactions sitting at home.
A high-level meeting of top 15 bureaucrats was convened in New Delhi on Thursday by Cabinet Secretary K M Chandrasekhar to work out the modus operandi.
Various issues impacting the use of mobile phones as a tool for improving the people's access to the financial services are proposed to be sorted out by a small sub-committee that may be constituted following this meeting, a top government source disclosed.
The department of information technology (DoIT) has prepared a report on how to speed up the implementation of mobile banking.
Feasibility
In a background note prepared for the meeting, the department says the feasibility of mobile transactions has been already established by the Reserve Bank of India (RBI) by permitting them past one year and the telecom operators are confident of providing robust solutions for access using ordinary mobile phones.
It says the RBI's initiatives taken in October 2008 and April 2009 to allow mobile wallets and mobile accounts limiting goods purchase up to Rs 10,000 and funds transfer up to Rs 5,000 may, however, simply end up as an added channel for already banked customers, instead of reaching out to crores of unbanked population.
The note, therefore, lays stress on creating a mechanism that places the essential banking service within the reach of the common man. It says such a mechanism will, however, have to fit into several regulatory domains like telecom, banking, payment system supervisors and anti-money laundering agencies.
Mobile penetrationMobile phones are the only service that has exceeded expectations and crossed conventional barriers to reach out the poor, both in the urban and rural areas. There are already 42 crore (420 million) mobile phone users in the country and their number is rising by 1.2 crore (12 million) every month.
As against only 34.1 per cent urban poor and 26.8 per cent rural poor with monthly income of less than Rs 50,000 have bank account, almost 40 per cent own mobile phones, so the government plans to link up the mobile phones with the financial services that otherwise remain a pipe dream for the poor.
Sources said the plan is part of the UPA government's e-governance vision cleared by the Union Cabinet in May 2006 to make "all government services accessible to the common man in his locality, through common service delivery outlets and ensure efficiency, transparency and reliability at affordable costs to realise the basic needs of the common man."
They said reaching out banking services to the poor is an important part of that vision to be carried out not only through 2.50 lakh e-kiosks or common service centres (CSCs) but also through other mediums like mobile phones that the deprived can easily reach.
Taking specific note of the stupendous growth in the mobile sector, the DoIT is taking proactive steps to include the mobile phones as an important channel for delivery of the government services. It refers to a research report of November 2007 that says there were 2.6 crore (26 million) households who have mobile phones but no bank accounts.
Huge opportunityClearly, a huge opportunity waits to be tapped wherein the basic banking services can be extended to the large sections of mobile users who are currently outside the banking network. Sources said establishment of a system for enabling financial transactions using the mobile has, therefore, emerged as a key component of the service delivery strategy.
They point that the mobile transactions will be used by everybody because of the ease of use and the proposed plan will also bring a huge volume of transactions under the tax radar, thus becoming a buoyant source of revenue even at marginal tax rates.
Besides, it will also enable tracking of a large volume of small financial transactions which are currently beyond the banking network, sources said.
Tried and tested systemsThe department's note points out that a number of mobile payment systems have already been tested in India while certain mobile-based payment models have been found hugely successful in the developing countries like South Africa, Kenya and Philippines.
Each model of the mobile-based financial services abroad that was studied by the department is based on the unique local needs of people and prevailing regulatory environment of the country. Some models are driven by banks, others by telecom operators and still others by hybrid models.
A model that is finally evolved and adopted in India will need to realise the objectives of financial inclusion of the common man, fulfilling the Union Cabinet's 2006 vision of reaching basic services to each and every citizen of the country, the sources added.
