The Reserve Bank of India has increased the daily transaction cap via mobile banking to Rs 50,000 per customer for both funds transfer and transactions involving purchase of goods and services, and instituted a per transaction cap of Rs. 5000 for funds transfer and Rs. 10,000 for purchases. This is a significant increase over the previous set of limits: a daily cap of Rs. 5000 per customer for funds transfer and Rs. 10,000 per customer for purchases. In additiontransactions up to Rs. 1000 can be facilitated by banks without end-to-end encryption.

These changes clearly seek to address two specific issues that banks have faced in implementing mobile banking services: banks feel that end-to-end encryption for low ticket transactions was costly, and limits of Rs. 5000 and 10,000 often do not permit purchase of airline tickets.

(Do also read: Not Enthused By Lack Of Activity In Mobile Banking, Prepaid – Deputy Governor, RBI)

Cash Withdrawal

The other big change that has been instituted is that customers can use mobile phones for remittance of cash, though ATMs or agents appointed by banks (banking correspondents). Readers may recall that just last month, the RBI had allowed PCOs, grocery shops etc to act as banking correspondents. This means that using your mobile phone, you can withdraw cash from a grocery store. Such transfers are limited to Rs 5000 per transaction, and a maximum of Rs. 25,000 per month per customer can be withdrawn. Banks have been asked to place a suitable cap on the velocity of such transactions.

But Will It Help?

Do you think you would be comfortable enough to use your mobile for banking services? Do you, as a consumer, feel that you know enough about mobile banking? I think these steps will help increase the transactions, but it clearly won’t be enough to get more people to use mobile banking.

So far, we’ve seen little beyond lip service from telecom operators, and I think that is largely because mobile banking has been reserved by the RBI as a banking service. So it’s up to the banks, who just aren’t doing enough to promote and encourage mobile banking: is there enough incentive being provided to them to promote mobile banking services?

Has any bank or service provider taken on the mandate of creating and more importantly, promoting a merchant network for shopping, the way Visa and Mastercard have build an ecosystem? For the time being, until the deadlock between banks and mobile operators is broken, I think it will be the business correspondents model for cash withdrawal which will succeed: for all the talk of ‘banking the unbanked’, cash will still be king in India.

Key Mobile Banking & Commerce Initiatives

Dec 24, 2009: RBI modifies mobile banking operating guidelines (this story)
Dec 7, 2009: RBI Deputy Governor KC Chakrabarty criticized lack of mobile banking uptake (read)
Dec 1, 2009: RBI Allows PCOs, Grocery Shops To Offer Banking Services, But Not Telcos (read)
Nov 24, 2009: Payment Settlement Guidelines for Payment Gateway service providers (read)
Nov 12, 2009:
Payment Systems in India – Vision 2009-12 (read)
Feb 18, 2009: Indian E-Commerce Braces For Changes In Credit Card Verification Norms (read)
Nov 21, 2008: RBI Finally Takes Up The Issue Of Internet Wallets And Cash Cards In India (read)
Oct 13, 2008: RBI Updates Mobile Banking Guidelines: Txn Limit Increased, Debit & Credit Cards Not Mandatory (read)
Sept 22, 2008: M-Banking Guidelines For India Issued; Ridiculous Transaction Limit (read)