Financial Inclusion through E/M-Banking – The Regulatory Landscape in India

This Note examines the regulatory landscape for mobile banking (m-banking) in India. It examines whether restrictive regulations prevent the take-up of m-banking.

The paper demonstrates that the absence of a strong value proposition for the customer is at the core of slow off take of m-banking services, especially for low income segments. Key points include:

• Reserve Bank of India (RBI) has permitted charging the customers and has relaxed know-your-customer (KYC) norms for the unbanked;
• RBI has clearly shown its intention to open up and relax regulations when the industry shows signs of stability and a promise to grow;
• Banks need to harness the potential of BCs and business facilitators (BFs) under the existing regulatory framework before asking RBI for more concessions.

The next set of enabling regulations could be around interoperability between BCs of different banks, differential pricing based on geography, difficulty or ease of accessibility and similar factors. Such a pricing mechanism will provide banks the impetus to work towards making a strong business case for BCs and agents, and not to shy away from remote or difficult locations.