Mumbai: Migrant labourers will shortly be able to remit money back home through banks even if they don’t hold accounts.
“Such fund transfers are expected to be effected on a real/near real-time basis,” Reserve Bank of India (RBI) said in a notification on its website on Wednesday.
This is a major step towards financial inclusion as migrant populations do not have access to banking channels for want of a proof of identity or address. Migrant labourers rely on unauthorized private agencies, brokers or other unauthorized channels to transfer money to rural areas.
Only about 40% of India’s population has bank accounts.
RBI has enhanced its limit on the money an account holder can transfer via banks to a beneficiary without an account, to Rs 10,000 per transaction from Rs 5,000 earlier. The monthly cap is Rs 25,000 per beneficiary. Such transfers now take place through very limited private agencies, mainly through business correspondent channels in rural areas.
A person without a bank account can transfer up to Rs 5,000 per transaction, with the same monthly restriction.
RBI’s decision to allow non-account holders to transfer money through banks will pose challenges in adhering to the know-your-customer, or KYC, norms, say bankers.
But, eventually, the Aadhaar number, or the unique identification number being rolled out for all Indian residents, can be used for verification.
“This move is aimed to cut the reach of the unorganized sector, which charges high commissions from migrants to transfer small amounts. KYC in these cases is not required because this is considered too small an amount, and there are enough limits for the transaction,” said a banker with a private lender.
RBI said it decided on allowing migrant workers to transfer money via banks after “frequent representations to open up the formal banking channel to facilitate fund transfers of small value...” to give an impetus to the government’s financial inclusion drive.
But banks will have to put “in place a robust system of safeguards”, including sending alerts on transactions to customers, it said. Funds can be transferred only through RBI-approved payment systems and banks may fix “reasonable charges” to popularize the scheme, RBI added.