Indian government to permit rural m-banking from July

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People will be able to withdraw cash and transfer funds using their mobile phones in rural areas after the government approved the framework for introduction of such facilities by the banks.

The government wants them to begin the roll-out from 31 July and complete it by the end of next year.

The idea is to provide access to m-banking services through a business correspondent (mobile phone owner) in the village. The services on offer will include a mobile-linked account from which people can withdraw cash, deposit money, make balance enquiries and P2P money transfers. This will also facilitate transfer of funds of various government schemes like the National Rural Employment Guarantee, to a mobile linked account..

The Communications Ministry issued a statement saying, “With the acceptance of the report of inter-ministerial group (IMG) by the committee of secretaries banks are being advised to implement the IMG framework on priority basis to extend basic financial services to the unbanked population.”

It is important to note that the IMG model ensures funds remain within the banking system throughout and the intermediary never has custody of the funds. This is in keeping with its stance it has taken in prohibiting mobile operators from offering banking services, for instance, it prevented Vodafone launching its hugely successful M-PESA service in India on the grounds it wasn’t a bank and also that banking must take place within the vicinity of a bank, a policy it has clearly now revised.

The IMG is also determined to see the rapid national deployment of access to these mobile financial services and recommended that the Reserve Bank of India allows for-profit corporate entities to function as business correspondents.