One small step

After long delays and longer dilly-dallying,India embarrassingly slow in embracing mobile banking looks set to make a beginning. Its not that m-banking has been missing from here altogether,but the range of services,number of banks allowed to transact and transaction volumes have been negligible. So its welcome news that the Telecom Regulatory Authority of India and the RBI have reached an understanding on regulating m-banking. At the heart of the problem so far has been the unwillingness of banks to allow telecom companies to venture any farther than providing the network. Yet the benefits of transacting through,say,merely a text message via a mobile phone in a country with half a billion mobile phone connections cannot be denied.

That granted,it is discomfiting that the model being opted for does not address the fundamental logic of m-banking in India,with its large rural population,wherein mobile connections outnumber bank accounts. The model envisioned for rural India will enable customers to use their mobile phones to deposit or draw cash from their mobile-linked bank accounts. That is the catch without a bank account,it is of no use. How then will m-banking address the governments plans of financial inclusion? What the unbanked poor need is mobile money that would permit them to transact as per their needs,regardless of bank accounts. Doubtless,this would increase the risk of money laundering and pose security threats,but thats nothing that cannot be addressed through verification technology,regulation and limiting the quantum of transactions permitted.

The ideal for financial inclusion through m-banking is often seen to be along the lines of M-PESA in Kenya which,as a non-bank model,has demonstrated itself to be safe and also penetrated deep into the unbanked sector. Instead,the model envisioned here is more like an additional feature like a debit or credit card provided to those already with an account. Furthermore,it must be asked how m-banking will help Indias vast migrant labour force. This model will not unless its broadened in the light of African models to ensure genuine financial inclusion. Till then,this start will merely be a halfway measure.