Mobile Banking Coming of Age in India

Being the world's second largest cellular market is one thing, but graduating into mobile banking is another. After a long wait, Reserve Bank of India, the central bank of the country, recently came out with a draft guideline for mobile banking transactions, thus laying the foundation for telecom and banking sectors to come closer for the sake of customer convenience and of course, higher penetration. Though the provisions put forth some restrictive clauses in terms of overall cap in transactions, market players were nonetheless encouraged to see the ball rolling, finally.

The RBI guidelines, released on September 19, allowed the banks – licensed, supervised, present and having core banking solutions – in India to offer mobile banking facility to select customers (holders of debt/credit cards) subject to RBI's approval and adherence to technology and security related stipulations. However, the limits for a single transaction and per day transactions were set at a lowly Rs 2,500 and Rs 5,000 (about $55 and $110) respectively. Also, no cross border transaction was allowed and transactions based only on Indian rupee (Rs) were permitted.

Laying the basic roadmap for the mobile banking sector, the bank said “The long term goal of mobile banking framework in India would be to enable funds transfer from account in one bank to any other account in the same or any other bank on a real time basis irrespective of the mobile network a customer has subscribed to.”

However restrictive the provisions may appear, the RBI move did succeed in setting the ball rolling. Soon after the release of these guidelines, the department of telecommunications (DoT) reportedly revealed its plan to seek the apex bank's guidance on providing full-fledged mobile banking services to customers. The DoT move is aimed at allowing customers to virtually use mobile phones as debit or credit cards. These services, DoT observed, would not only bestow greater customer convenience, but also raise revenues for the telecom operators from this sector.

Currently, only a few telecom operators including Bharti Telesoft and Vodafone offer some basic services in association with banks such ABN AMRO, HDFC, Kotak Mahindra bank, Barclays, etc. While most of these players felt the provisions of RBI guidelines as limiting, they were nevertheless encouraged by the proposed move by the DoT, expecting that the joint endeavour by the ministry and the apex bank would speed up the process of opening up of the segment in not so distant future.