Reserve Bank of India deputy governor H R Khan on Wednesday said mobile telephone operators cannot be permitted to provide a cash-out facility from virtual wallets to customers, as such an activity would amount to ‘bypass banking’. However, they could do so if they acted as a business correspondent (BC) to a bank, he added.
Recently, Airtel had launched m-wallet services that enable a customer to make utility payments and transfer money from one user to another. By the norms, mobile transactions are permitted only if attached to a specific use, such as paying electricity bills or shopping at retail establishments that accept mobile payments.
RBI does not allow encashment of the balance available in mobile wallets, though mobile operators are reported to have requested the banking regulator to allow them to provide a cash-out facility to their customers.
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“Basically, it is an e-money product, so we have to see that mobile network operators do not get into ‘bypass banking’ and that is why we said cash-out will not be permitted. Of course, if it acts as a BC, then at the BC point, cash-out is permitted,” said Khan. He was addressing the Annual Ficci-IBA Banking Conference on Wednesday. He added mobile banking and payments have to be a bank-led model, as a mobile operator will only be able to provide remittance services and not full-fledged services such as bank does.
Khan said mobile banking transactions grew 140 per cent in terms of volume and more than doubled in terms of value over the year ended June 2012. “The whole idea is that there is great potential to grow, as it can be used for payments of goods and services without customers having to carry any additional card. But we have a limitation as far as cash-out is concerned,” he added.
Security, privacy and acceptability are other obstacles in the way of moving towards mobile payments. Also, merchant establishments do not accept electronic payments, in order to evade tax obligations. A panel discussion here on mobile payments had suggested allowing cash-out facility to boost mobile wallet usage.
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Bankers also felt the regulator could consider allowing issuance of mobile wallets by BCs without the need of a Know Your Customer (KYC) exercise by banks. “We need to work with the regulator and see if nil KYC wallet can be provided by BCs.
The wallet can have limited usage facility,” said R Karthikeyan, chief general manager at State Bank of India. He said going through a KYC exercise for a large number of m-wallet customers led to congestion at bank branches. SBI, the country’s largest lender, has rolled out mobile banking services on a pilot basis in around five cities.
On allowing cross-border mobile transactions, the deputy governor said there was an issue relating to the quality of inflows, as India was a target of terrorist activity.