Phone banking

India has been extremely slow to embrace mobile banking. Mobile banking refers to a financial transaction through a mobile device,primarily the mobile phone,often through a text message. In a country with an estimated half a billion mobile phone connections,the benefits would be obvious. And to that extent,reports this week that the Reserve Bank of India is relaxing norms for mobile banking are welcome. Banks can now offer the service to customers subject to a daily cap of Rs 50,000 per customer for funds transfer and for transactions involving purchase of goods and services.

All this makes for more convenience,but it does nothing to address the use of the mobile phone as an instrument for financial inclusion. At present,that is,the RBI only permits the use of mobile banking through licensed banks,that is only users with existing bank accounts can opt for mobile banking. But the percentage of Indians with bank accounts is extremely low not in the least because the poor find it very difficult to open and maintain bank accounts. What they could do with is mobile money,to be able to conduct transactions without necessarily operating through bank accounts. Governments are understandably wary of this,as it could be used for money laundering and be a security threat. But with certain caveats instituting norms to make transactions traceable with the Unique ID,for example and to limit the quantum of transaction this need be very little to benefit the poor it can be doable.

Financial inclusion is a big challenge for this country. The government and the central bank should consider ways of realise mobile moneys potential.