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The Reserve Bank of India’s decision to allow individuals to open bank accounts with a permanent address will provide a boost to the process of financial inclusion, according to bankers and industry experts.
This will not only bring migrant workers but also students and people with a transferable job into the banking fold, experts are of the opinion.
Rishi Gupta, chief operating officer & executive director, FINO PayTech, a Mumbai-based payments technology company that works in the financial inclusion space, said relaxing the Know Your Customer (KYC) norms for opening of accounts augurs well for the financial ecosystem, as it allows more people to use banking services. “Currently, RBI is relaxing norms to open bank accounts and this is the first step in the stage of financial inclusion. Once this is done, the second step will be to ensure these accounts remain active and made productive by using other basic and advanced financial services,” he added.
Reports point out that, according to RBI, in 2006, 150 million households across the country did not have a bank account. And if each household had presumably 4 members, than the number of people without a bank account was about 600 million.
In the last seven years, with the relaxation in the KYC norms, banks and technology-enabled business correspondents model, over 200 million no-frills bank accounts have been opened in nearly 300,000 villages.
Banks have been asked by the regulator to revise its own KYC norms accordingly. Bankers believe it is a welcome move but may pose some initial operational hurdles.
R K Bansal, executive director, IDBI Bank, said though this was a step ahead in financial inclusion, it may pose some operational challenges for the banks, initially. “Banks will have to be careful in verifying the permanent address. It will slightly increase the requirement of verification.”
The banking regulator has suggested that banks will need verify the local address through “positive confirmation” such as acknowledgment of receipt of letter, cheque books, ATM cards, telephonic conversation, visits, etc.
Murali Natarajan, managing director & chief executive, DCB, also said the banks will have to carefully look at the operational part. “The process of how a bank will verify the address will also need to be deliberated and finalised as the genuinity of the address given will need to be verified carefully.”
Rana Kapoor, MD & CEO, YES Bank, added that though this will act as a great enabler in taking urban financial Inclusion to new level, however, necessary checks and balances, systems and procedures should be in place to ensure that no one misuses this relaxation.
