Cash transfer has a small fee but you may not need to pay it

Cash transfer has a small fee but you may not need to pay it

Santosh P., a Bangalore-based 25-year-old entrepreneur and his group of seven friends have their fair share of group outings. From going dutch every evening to settling accounts through Internet banking every month, they have been in step with technological changes.

In the past few months, this group explored a new option, which enables them to settle payments on the spot. Not by handing over cash to the person who used his card, but by transferring cash to the person’s savings account through their cellphones.

The group has logged on to the inter-bank mobile payment service (IMPS), launched by the National Payments Corporation of India (NPCI) in November. The facility allows savings account holders to transfer money to another account within the country using their cellphone.

Santosh registered for it as soon as it was launched and has done several transactions; the transfer didn’t go through only twice. “In fact once my friend was at the ATM when he reminded me to transfer the money and I sent it across. It’s that quick and convenient," he says.

While the transfers are done real time, the process of registration and generating the MMID (mobile money identity) is simple and quick. In fact, in some cases, for example Axis Bank Ltd, the transaction is just an SMS away if you are already a mobile banking customer of the bank. Besides, the client application that you download to use this facility allows you to do a host of other transactions through your mobile. “There are no hidden charges as far as I remember," Santosh adds.

New charges

The Reserve Bank of India had mandated all banks to offer the IMPS facility free of cost till 31 March 2011. NPCI did not levy even switching charges on the banks. However, NPCI has decided to levy a fee of 10 paise as switching charges per successful transaction in the new financial year. As of now, the charges will be applicable from 1 April 2011 to 31 March 2012.

This charge would be applicable to the sending bank. The banks have the freedom to charge their respective customers as per their policy.

The good news is most banks, such as Kotak Mahindra Bank Ltd, Axis Bank and Yes Bank Ltd, will absorb the fees and not pass it on to the customers. Says Suresh Sethi, group president (transaction banking), Yes Bank, “The usage is still limited and the system is in a nascent stage. So right now our focus is on getting customers to use it. Once that is done then we will focus on building a commercial model around it and consider levying a fee."

When the service was first inaugurated, seven banks—State Bank of India, ICICI Bank Ltd, Union Bank of India, Bank of India, HDFC Bank Ltd, Axis Bank and Yes Bank—went live with the system. Today, 15 banks offer the service and about 10 more are expected to join in.

Says M. Balakrishnan, chief operating officer, NPCI, “NPCI is striving hard to ensure that 20-plus banks join this service by 30 April 2011. Since this service can also be used by the bank for transfers within the bank, it is expected that the usage would go up substantially and thus provide an impetus to move more payments to the electronic mode."

In February 2011, the system had issued 6,647,000 MMIDs, registered 2,248 transactions and saw remittance worth Rs73,34,064.43 up from 1,053,546 MMIDs, 860 transactions and volumes worth Rs4,74,854.95 in November, when it was launched.