One of the sectors which has witnessed the highest growth rate, nationally as well as globally, is the telecommunications sector. The mobile phone subscriber base in India, as of March, was around 261 million, and growing at about eight million a month. In fact, considering the low penetration ratio of around 26% in the country, the sector is expected to maintain its scorching pace of growth.
With the rapid growth of mobile phone subscribers in India, banks (and mobile phone operators) have been exploring the mobile phone medium for various services.
Till recently, no formal guidelines existed in relation to mobile money payments and, hence, this was being governed by normal banking regulations, which had evolved in an era when no such services were available.
Various banks, in collaboration with telecom service providers, have already initiated pilot projects to offer mobile payment facilities, which would allow a subscriber to transfer funds through his mobile phone.
Considering the impending flurry of such service launches, the Reserve Bank of India (RBI) issued draft operating guidelines concerning mobile payments in India on 12 June.
The guidelines recognize that various banks have started offering information-based services—such as balance enquiry, stop payment facility, etc.—through the mobile phone medium. Some banks have started offering advanced services concerning transfer of funds to beneficiaries of the same or other banks, etc.
Considering that the mobile payment technology is at a nascent stage, RBI considered it imperative to issue operating guidelines for strict adherence by banks. RBI’s focus seems to be on the security aspect, especially vis-à-vis the second category of transactions, that is, transfer of funds, etc.
An important clarification provided by RBI is that the guidelines are applicable only in relation to banking customers, within the same bank and across banks.
Illustration: Malay Karmakar/Mint
The term “mobile payment” has been defined in the guidelines as “information exchange between a bank and its customers for financial transactions through the use of mobile phones”.
The guidelines recognize that a mobile payment framework would have various players. Apart from the bank (which would provide the regulatory umbrella for carrying out such a mobile payment transaction), there would be mobile payment service providers, mobile network operators, etc. The guidelines seem to suggest that the role of such intermediaries is restricted to providing technology/telecom infrastructure.
Some of the key features of the draft operating guidelines:
—The guidelines clarify that only banks which are licensed/ supervised in India and have a physical presence in the country would be permitted to offer mobile payment services to Indian residents.