M-Banking a powerful financial inclusion tool: K C Chakrabarty

Microfinance focus, April 5, 2012: Mobile phones as a powerful tool for enabling financial inclusion said Dr K C Chakrabarty, Deputy Governor, RBI. He was speaking at the International Banking Summit on Regulation of Cross-Border Mobile Payments and Regional Financial Integration at Mumbai on March 29, 2012.

Way back in 2008 the RBI had recognized the mobile phone’s potential. The first set of guidelines was taken in 2008. The Reserve Bank consciously opted for a bank-led model although their approach remains technology neutral. Mr Chakrabarty said that mobile for banking in financial inclusion cannot become a viable proposition on a standalone basis if the purpose is to achieve meaningful financial 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.


Mr Chakrabarty opined that 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 their 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, they have been in constant dialogue with the stake holders and intervened to liberalize the mobile banking guidelines in a phased manner.


Dr Chakrabarty informed it is evident that mobile phones have reached more households than basic banking services. Banks have not really made a significant penetration even among their existing customers to extend mobile banking services. However, the most important concern is that there is a significant percentage of financially excluded population and the potential of the mobile phone to extend them financial services is still to be tapped, he said.

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 difficulties of banks to viably operate bank branches in every village, they had permitted them to appoint Business Correspondents (BCs) to address this. On demand from the industry, they 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.

Dr Chakrabarty reiterated that the mobile phone is a potent tool to facilitate financial services and thus financial inclusion.

He concluded saying that it is the social responsibility of everyone, who has the resources and the power, to contribute to the success of financial inclusion. While they have the guidelines to M-power financial services, it is necessary, the RBI, banks and the MSPs in particular, to take this forward in the 4th gear by convincing the common man not only on the power of the mobile phone for doing financial transactions but also the safety and security aspects of mobile banking, to provide a level of comfort.

Dr Chakrabarty said that 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 financial 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 significant way, he added.



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