Reserve Bank of India (RBI) is working on a new system that will allow you to send money via SMS, which can then be withdrawn from any ATM, even if the recipient does not have a bank account, RBI governor Raghuram Rajan announced at the Nasscom India Leadership forum. With this move, the apex bank is trying to cater to 41% of the population who do not have a bank account. According to RBI data (pdf), 40% of the people living in urban areas do no have a bank account, while in rural areas 61% of the population are unbanked. When Rajan became RBI governor, he had identified mobile payments as “game changer both in the financial sector as well as to mobile companies” in his first speech. He had then set up a technical committee to look into the feasibility of using “encrypted SMS-based funds transfer using an application that can run on any type of handset”. How will it work? The method recommended by the technical committee appears to be very different from the one suggested by Rajan. As per the committee, the fund transfer happens directly between bank accounts with operator playing a role only in the initial part of the process. What the RBI Governor has suggested now is the creation of an intermediary that will process the payment. So if you want to send the money to someone, you need to send an SMS to the intermediary in a certain syntax. The intermediary will then take that…
