Telcos may take banking to the unbanked

After grocery shops, petrol pumps and PCOs, telecom operators could get the nod to provide basic banking services to people who do not have a bank account. However, they will have to keep the banking system in the loop, as against the earlier proposal of the communications and information technology ministry to deliver financial services through mobiles without linkage to bank accounts. 

A high-level inter-ministerial group, set up in November 2009 to look into the possibility of money transactions through mobile companies without routing them through the banking channel, has decided that mobile service providers should be allowed to offer financial services like transferring, depositing and withdrawing cash for the unbanked population only by involving the banks in the process. 

“It will be a bank branch-led system with mobile companies functioning as business correspondents. Both the home ministry and the RBI had fears that financial transactions between two private parties without bank linkages could give rise to money laundering,” a finance ministry official said. 

Currently, customers are allowed to transfer funds up to Rs 5,000 and make purchases up to Rs 10,000 through mobile banking. The committee may propose increasing this limit and provide linkages between UIDAI and mobile operators. In the proposed system, the recipient will be able to collect the money from a mobile outlet by showing a transaction authorisation code received from the sender. 

“The existing system is more tailored for people who have a bank account. The proposed system will mainly benefit people who own a mobile phone but do not have a bank account. This will allow them to transfer cash to a distant relative, pay a bill, deposit or withdraw money at convenience,” another government official involved in the process told Business Standard. 

The final meeting of the committee, also comprising secretaries and top officials of rural development ministry, planning commission, UIDAI, and representatives of telecom regulator Trai and RBI is on April 1. The committee will give its recommendations in a report. A draft has already been prepared. 

The committee will 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 RBI, security of deposits and transactions, and geographical coverage of services including border and sensitive areas, among others.