Evolving a Framework for Delivery of Basic Financial Services Using Mobile Phones A proposal is under consideration of the Government

regarding introduction of a Mobile Based Model for delivery of basic financial services. The proposal assumes significance considering the growing number of mobile subscribers among the rural population and the disadvantaged sections. With mobile subscribers in rural areas far in excess of bank account holders, a large section of rural population now has access to mobile telephony but not to financial services through banks. With the rural mobile subscriber base expected to grow significantly over the next few years, a delivery mechanism that enables provision of basic financial services on the individuals mobile could be a major step in the direction of reaching out to the unbanked population of the country. Evolving a framework for delivering financial services over mobiles as envisaged gives rise to the need to work out relevant norms and modalities and to define the roles and responsibilities of various stakeholders, Ministries/Departments and Regulatory Bodies like RBI and TRAI. An indicative list of the issues likely to be addressed in this context is as follows: i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) xiii) xiv) xv) The type/types of transactions that could be allowed The quantum of financial limits which may be imposed The types of guarantee to be offered by the airtime vendors Eligibility of the agencies involved The role, responsibility and accountability of telecom service providers Regulatory issues to ensure accountability, auditability and traceability of money transfers Need for inter-operability between various service providers and standards involving the agencies processes, transactions and formats involved Interface with banking regulator Safety of deposits Security standards governing transactions Issues with respect to KYC-Know Your Customer provisions Customer Protection, complaints & redressal mechanism Linkages with the proposed Unique ID for residents Geographical coverage of services with respect to inclusion of border/sensitive areas Leveraging the a. existing infrastructure established and operationalised by the telecom service providers across the country for airtime payments b. electronic service delivery outlets in the form of Common Service Centres/Bharat Nirman kiosks being established across the country c. existing infrastructure created by the States/any other agency Any other issue with respect to conceptualization and operationalisation of the mobilebased financial services model

xvi)

To address the above issues, Government has constituted an Inter Ministerial Group (IMG) under the Chairmanship of Secretary, Department of Information Technology, Government of India with
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Secretaries from Department of Telecommunications, Department of Financial Services, Department of Posts, Ministry of Rural Development, Planning Commission and representatives from Ministry of Home Affairs, UID Authority of India, Reserve Bank of India and Telecom Regulatory Authority of India as members. The first meeting of the IMG took place on 3rd December 2009 where an agreement was arrived at on the goals for a suitable financial service delivery system, the necessary conditions within which to achieve these goals and the key elements of financial service delivery. The following are the details thereof: Goals

Ability to deposit money in an account Ability to transfer money Ability to cash-in & cash-out Ability to make transactions across service providers Nationwide coverage

Necessary Conditions Adequate KYC Norms Authentication mechanism Adequate Security standards to cover Safety of deposits End to end security (confidentiality, integrity and non-repudiation) of the entire electronic transaction chain Customer protection and Grievance Redressal Traceability subsuming AML requirements Originator of the transaction Processor of the transaction Receiver of the transaction Key elements of financial service delivery to the unbanked Mobile Operator Bank Intermediary Post Offices UIDAI (as and when UID services are available)

Subsequent meetings of the IMG will focus on the means for achieving these goals. Concerned stakeholders are invited to present their views on the subject so that these could be suitably addressed / incorporated while a framework is evolved for delivery of basic financial services using mobile phones. Your suggestions may be sent to the following officer at his email address as indicated:

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Shri D. Krishnan Principal Consultant & Adviser Department of Information Technology 4th Floor, Electronics Niketan 6, CGO Complex Lodhi Road New Delhi 110003 Ph: 011 30481612, 24301939 Email: krishna@negp.gov.in

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