Trai, RBI reached an understanding on regulation for rollout of m-banking

In India the number of mobile users is increasing every year. Thus introduction of mobile banking in the country will play an important role in providing banking services to the customers easily and this will also help in government's plans of financial inclusion to speed up.

To ensure smooth roll out of mobile banking in the country the Telecom Regulatory Authority of India (Trai) and the Reserve Bank of India (RBI) have reached an understanding on its regulation.

According to the understanding Trai will deal with all interconnection issues and RBI will look into banking aspects like the maximum amount of transaction per day, know-your-customer guidelines and verification criteria, the official sources told FE.

With this the telecom operators feel relived as they had fear of getting caught in a possible regulatory crossfire although they were excited of the fact about the mobile banking. Such fears of telecom operators had gained dominance due to recent arguments between capital market regulator Sebi and the Insurance Regulatory and Development Authority over regulating unit-linked insurance products. Therefore, to resolve this issue late this week, government circulated an ordinance in favor of Irda.

In mobile banking interconnection is an important aspect as telecom networks have to be connected with bank networks, thus the charges payable on these counts and the number of points of interconnection need to be worked out in a manner which leaves no room for dispute. Trai has been authorized for charges as it has the required expertise in the area.

Trai will also be responsible for setting tariffs which consumers will have to pay for mobile banking access. An official involved in the process said, “The areas of work have been neatly divided between the two regulators and we will work with perfect coordination.”

For telecom operators, mobile banking will bring in more revenue also it will help in expanding banks’ reach in rural areas where mobile telephony has made giant strides. In rural areas you can find mobile users but they don’t have bank accounts.

According to data, every year, country’s largest mobile operator Bharti Airtel alone is making Rs 25,000 crore by way of recharge coupons. When mobile banking is launched, people will be able to withdraw cash and transfer funds using their mobile phones.

The government has already given an approval for the framework for the launch of this facility by the banks. Government and RBI have advised banks to start mobile banking services in rural areas by July 31, and complete the process by the end of next year. The government took action on the basis of the report of an inter-ministerial group led by a committee of secretaries.

The group was headed by the secretary, department of information technology and had representatives from the departments, of financial services, post, rural development, Planning Commission, UID Authority, Trai, RBI, department of telecom and the home ministry.

It is expected mobile banking model will enable rural areas mobile phone users to deposit and draw cash instantly into or from their mobile-linked to no-frills bank accounts through a business correspondent having a mobile phone in the village. The important feature of the proposed framework is that funds remain within the banking system throughout and the intermediary does not have custody of the funds even momentarily.