RBI backs mobile banking to achieve inclusive growth

By Naagesh Naaraayana

Microfinance Focus, Aug. 14, 2009: Reserve Bank of India’s deputy governor Dr. K.C.Chakrabarty, recently said the mobile banking has tremendous potential as a medium of money transfer to the unbanked people but cautioned to use it with utmost security features. With more telecom companies working on security features, very soon this will help reduce transaction costs of microfinance institutions and thus effectively bring down the interest rates of the micro-loans to the poor and unbanked people, he said.
Speaking at the inauguration of the ‘Core Banking Solution Project’ of the A.P.Mahesh Co-op Urban Bank Ltd. in Hyderabad on August 9, Dr Chakrabarty said,”Traditionally, we have seen and observed that the poor have not been welcomed to the banking fold by the banks and financial institutions with a misconception that they are not bankable and there is no business opportunity in offering services to the under-privileged and poor people in the semi-urban rural and slum-dwellers in the metropolitan cities.”
Given the belief that Credit is a Human Right as advocated by Nobel Laureate Professor Muhammad Yunus, and the poor can overcome poverty by generating their own employment and income, he said, “Financial Inclusion imparts formal identity, provides access to the payments system and to savings safety net like deposit insurance.”

Calling for a major role for urban cooperative banks (UCBs), he said, “This section of financially excluded people in the urban areas provides a good opportunity for the UCBs to step in and fill this void. This is a challenge and a big opportunity for the UCBs at the same time; and I reiterate that if UCBs are not able to grab this excellent opportunity, new institutions will come up to fill this void and UCBs will lose a good business opportunity.”

He said cooperative banks and regional rural banks being local level institutions are well suited for achieving financial inclusion. Being local institutions they are ideally suited for achieving Financial Inclusion while the use of IT solutions for providing banking facilities at people’s doorsteps holds the potential for scalability of such initiatives.
The deputy governor also highlighted several pilot projects initiated in various states using smart cards for opening bank accounts with bio-metric identification. “Here, the link to mobile or hand held connecting device ensures that the transactions are recorded in the bank’s books on real time basis. The outcome of these pilot projects has been promising. However, we have to now ensure that the gains and lessons from these pilot projects are translated into an achievable, affordable and implementable plans on a pan-India basis to leverage the benefits of inclusive growth. Otherwise all our hard work in recent years would fizzle out without many tangible benefits,” he added.

© 2009 – 2010, Microfinance News. All rights reserved. 2008-09