RBI guidelines on mobile banking regarding compulsory inclusion of banks as financial intermediaries for transactions is attracting ire

from the mobile value-added-services (VAS) and Internet industry, who maintain that both banking and non-banking entities should be encouraged to offer this service.

Says Internet & Mobile Association of India (IAMAI) president Subho Ray, “The present set of guidelines will only encourage people who have a bank account to use mobile banking as an additional facility to ATM or Net banking. It does not address the larger issue of (financial) inclusion of large number of population which does not have a bank account.”

Industry players demand that both telecom operators and mobile VAS providers should be allowed to offer payment mechanisms to subscribers not having bank accounts as well.

“This would encourage people who have a mobile phone (about 300-million) to use the mobile banking platform. Else, it will become just another facility being provided to people who already own bank accounts,” adds Ray. There are over 300-million mobile phones users in India, and just about the same number of bank accounts. Since many urban Indians hold multiple bank accounts, the number of people with bank accounts is much lower.

According to RBI, only banks which are licenced and supervised in India and have a physical presence in India will be permitted to offer mobile banking services. The services shall be restricted only to customers of banks and/or holders of debit/credit cards issued as per the RBI guidelines.

A detailed paper on mobile banking by Indicus Analytics, a New Delhi-based analytics firm, also points to the danger of crowding out of new players like mobile VAS because of existing relationships between service providers (telecom operators and ISPs) and consumers.

“Know your customer practices, which have contributed to financial exclusion, need not be replicated in the case of low-value digital payments. The digital transaction eco system should involve small firms. Large firms should not derive undue advantage from regulatory prescriptions,” says Laveesh Bhandari of Indicus Analytics.

“However, policy makers in the government and at the RBI continue to emphasise the role of the banks. It is time to look for new non-bank based models that can fill in the gaps,” he adds.

Many industry players add that there should be a separate set of guidelines for non-banking providers who want to offer same services. Says NGPay vice-president Abhijeet Bose, “The current guidelines are welcome, but the RBI may come out with a separate set of guidelines with same security measures to enable more people in the banking loop.”

But some like Obopay, a company into money transfer platforms, is advocating a gradual approach. Says Ravi Shankar of Obopay, “Let the current system of mobile banking develop confidence amongst users of its safety and security. The reason behind inclusion of banks in the guidelines is that RBI may have a direct control over the system. Only after the success of mobile banking with banks as intermediaries, non banking companies should be introduced.”

But IAMAI says that the guidelines need to align themselves with the vision of financial inclusion for the masses. According to sources in the VAS industry, RBI is also working on a set of guidelines for payments through cash cards and Internet, which are scheduled to be released next year.

Source : Economic Times

also quoted at  Every Thing About Mobile