RBI Intervention – Banking the Unbanked
At present, all beneficiaries of government schemes in Jharkhand have m-Pesa accounts and in order to increase penetration of the service, Vodafone organizes camps to sensitize people and issue them mobile connections.
Things changed for the better in June 2012 when Reserve Bank of India (RBI) started giving out licenses for operating mobile wallets. Telecom operators were given licenses to operate a semi-open mobile wallet that allowed consumers to send and transfer money, pay bills and do recharges, but did not allow the user to take out cash. However, RBI allowed interoperability with a bank, which enabled cash-out options.
In April 2013, the m-Pesa service was rolled out in the circles of West Bengal, Kolkata, Bihar and Jharkhand—a lot of people migrated from these states to bigger cities for jobs. Anybody could enrol for m-Pesa with a one-time payment of Rs 100 to the service provider and opening an account with the partner bank. The service provider collected know your customer (KYC) forms—like any bank does— and thousands of their dealers became m-Pesa agents or business correspondents, and started banking the unbanked.
The only problem at the time was that all m-Pesa agents had to be within a 30-kilometre radius of their parent bank, especially since their bank’s tieup did not have deep penetration in rural India. This restriction was subsequently removed and m-Pesa can now reach remote parts of the country provided the telecom signals reach there.
Within a year of m-Pesa's launch, the service provider completed their pan-India rollout. Today, they reportedly have 80,000 outlets or banking correspondents, and 60 per cent of them are in rural India. Even though m-Pesa facilitates other services like utility bill payments and recharge options, money transfer accounts for as much as 60 per cent of their business.
The advantage in popularizing this mobile platform is the limited banking infrastructure in the country and the millions of migrant workers’ need to send money home in a secure manner. What helps further is that the service provider has a distribution network that spans 1.7 million touch points, and deep penetration in rural India – of their 170 million users, 53 per cent are claimed to be in rural areas.