In India, less than 40 percent of the adult population possesses a bank account. At the moment, recipients can withdraw money only from an ATM of the bank where the sender holds an account. However a new scheme by the Reserve Bank of India (RBI) proposes to change the entire game. RBI plans to set up a payments system wherein transfer of funds is possible from bank account holders to those without accounts via Automated Teller Machines (ATM).
RBI governor Raghuram Rajan told the Nasscom India Leadership forum, “An intermediary will be set up to process the payment and a code will be sent to the recipient on their mobile phone that will allow them to withdraw the money from any bank’s ATM.” He said that cashing out is significant for remittances since we have a humongous population , most of whom do not have access to formal banking services. “The system will take care of necessary safeguards of customer identification, transaction validation, velocity checks, etc. We need more such innovative products, some of which mobile companies are providing,” he added.
How does it work?
- The sender will need to have the recipient’s mobile phone number, to initiate a fund transfer.
- Once the transfer has been initiated by the sender, the receiver will get an SMS from the bank with a PIN.
- This PIN will need to be punched in at any ATM to withdraw the money.
Simply said, anyone would be able to withdraw cash from any ATM as long as the person who wants to send you cash has your phone number. Even if the number of banked persons increases, this system stands to gain according to me. Isn't it lot easier to have your bank do all the work, while you just type in the recipient's phone number and send him any amount you wish? On the receiver's end, you have a PIN that will give you the desired amount at any ATM you wish. This new plan has tremendous implications.
“We started working on it from November 2013 and it may take another three months for the process to become functional,” said Ram Sundaresan, NPCI (National Payments Corp. of India Ltd). “We have consciously adopted the bank-led model for mobile banking, while the non-banks, including mobile network operators, have been permitted to issue mobile wallets, where cash withdrawal is not permitted as of now,” said Raghuram Rajan.
The RBI governor also had a word to say on Bitcoin and related virtual currencies. “As a currency I do worry a little bit when the underlying fluctuates tremendously. One of the values of a currency is some stability. If a currency is a target of speculation as opposed to primarily a means of exchange, it does create some concerns for the user.”
In December 2013, a Public Advisory was issued by RBI which stated that users of Virtual currencies were exposed to legal and financial risks. The Central Banks notice warned the public of risks involved with the currency such as Money Laundering and anti terrorism activities. The RBI did not however place any restrictions, neither did it issue any sort of ban on Bitcoin related activities.