RBI to enable people with no bank account to withdraw money

A payment system will facilitate fund transfers from bank account holders to those without accounts through ATMs, said Raghuram Rajan

In its effort to deploy technology for magnifying the reach of financial services in the country, the Reserve Bank of India has recently approved a method to withdraw cash from Automated Teller Machine (ATM) for those who do not have a bank account in order to facilitate remittances.

“Recently, we (RBI) approved setting up of a payment system, which will facilitate funds transfers from bank account holders to those without accounts through ATMs,” Governor of Reserve bank of India Raghuram Rajan said on Wednesday. He was speaking at the inaugural session of the three-day Nasscom Leadership Forum in Mumbai.

Rajan said that through this method, the sender can go to an Automated Teller Machine with a participating bank and authorize the money to be withdrawn by a relative or a friend from his/her account. The intermediary then processes the payment and sends a code via mobile to the recipient. The recipient takes that code to the nearest ATM of that participating bank, punches in the code and withdraws the money.

Cashing out is very important for remittances because India has a large recipient population, most of whom do not have formal access to financial services. Such a system would help increase financial inclusion via usage of technology, said Rajan.

The governor who was speaking on the role of technology in the financial services sector said that the automation of transactions via technology will reduce transaction costs and in turn spur volume thus leading to better financial inclusion in the country.

Providing access to unbanked areas in India has been high on the agenda of RBI since almost 40 percent of the country’s population doesn’t have a bank account.

Rajan also spoke about how technology can be leveraged to analyse and monitor the saving patterns and expenditure of customers which will help banks build “information records” of people. This will aid in banks having a better credit history and will bring a larger population into the net of financial services including credit.”

Rajan also said that social media can be enlisted to identify fraud and help in better regulation. However, he asked the captains of the technology industry to come up with solutions on how social media can be leveraged.