Mobile banking pilot project started in villages across 12 states

The government will be starting mobile banking facilities for the villagers. Mobile banking pilot project and its full-scale operations are being conducted across 12 states, and the entire network will be managed by the government with the help of the Reserve Bank of India (RBI), banks, leading telecom operators and technology implementation partners.

With the help of this facility thousands of people from rural areas across 12 states will able to get their social security pension and wages paid under the National Rural Employment Guarantee Act (NREGA) scheme with the help of mobiles over the coming few months.

For example in Andhra Pradesh (AP) alone, 250,000 people have registered for mobile banking services. The state government is extending out a program to enroll three million people by the end of 2008.

The network is important as banking regulations in India presently do not allow cash for exchange of another ‘unit’ such as ‘airtime’ in the case of mobiles. Only banks and the Indian Post (through money orders) are currently allowed such transfers.

Mobile banking, which is catching up fast in the cities and surrounding areas, is not only helping the government to take a step forward towards fulfilling its aim of having one bank account for every household, but also saving it crores of rupees by way of reducing transaction costs.

While the government incurs a transaction cost of Rs 12-13 for every Rs 100 it shells out, mobile banking helps it reduce the cost to a mere Rs 2. According to RBI estimation around 40 per cent of Indians lack access to formal financial services and are largely ‘unbanked’.

For instance, the AP government has tied up with banks like the State Bank of India (SBI), Union Bank of India, Axis Bank, Andhra Bank, State Bank of Hyderabad, Andhra Pradesh Grameen Vikas Bank, and Punjab National Bank.

A Little World (ALW), a technology implementation partner, has come in a partnership with NXP Semiconductors to design a mobile for the AP government that encloses an RFID card, and works with ALW’s micro-banking platform ZERO.

Mobile works as a branch of the bank by storing a database of customers. It also has a smartcard, which biometrically stores the identity of the customer such as name, address, photograph, fingerprint templates and relevant details of the savings or loan accounts held by the issuing bank.

Customers get a secure electronic identity via phone or smartcard, while agents take deposits and dispense cash. ALW works with the banks on a revenue-sharing basis.

Anurag Gupta, founder director & CEO of ALW, says: “We have carried out pilot projects with SBI in villages located in some of the most inaccessible and difficult terrains of the country such as Pithoragarh in Uttarakhand, Mizoram, Meghalaya, and remote villages in Andhra Pradesh.”

Lokanath Panda, director, ALW, also pointed out that SBI had tied up with the Indian Post to extend banking services especially in unbanked/under-banked areas. “Select post offices will make available to the public SBI’s deposit and loan products, and ALW is the technology partner.”

ALW is also navigating a program with SKS Microfinance and the Bank of India to provide a mobile banking service that works on BSNL SIM cards.

New Delhi-based Ekgaon Technologies too has developed a system for tracking transactions made by self-help groups. It has partnered with the likes of CARE, World Vision and the World Bank to conduct a pilot which it plans to extend to 14 Indian states.

Bharti Airtel, too, is in the process of joining hands with two leading banks to extend its mobile remittance services to rural areas, according to its president (Mobile Services), Sanjay Kapoor.

Airtel has already partnered with the Indian Farmers’ Fertilizer Cooperative Limited (IFFCO) to set up IFFCO Kisan Sanchar Limited in Rajasthan.

Under this plan, the cooperative department will make available mobile handsets to farmers at marginal price through its outlets in the rural areas. These handsets would be loaded with green SIM cards, which will flash daily updates on agricultural practices and weather forecast free of cost.

While he did not provide details, Kapoor hinted that the partnership deal would be extended to mobile banking services too. Kapoor reasons that with 55 per cent of the mobiles being internet-enabled, mobile banking would help bridge the digital divide.

Reliance Communications, will allow ICICI Bank account holders with Reliance handsets (even the low-end Rs 1,000 ones — with or without Internet connectivity) to make intra-bank (to ICICI account holders) money transfers. It has already tied up with HDFC to offer Reliance mPay — a virtual credit card.