IMPS remittance service extended to No Frills Account Holders

New and innovative features are being added to the IMPS Product by NPCI. The latest feature, is that No Frills account holders are now interoperable with IMPS

No Frills accounts as the name suggests are Bank accounts with minimal features. As the accounts are opened with the bare minimum documentation, the sum of credit transactions in a financial year should not exceed Rs. one lakh in "No Frills Accounts". Once the limit is crossed, the customers have to take steps to submit the documentation for a full KYC, so that the no-frills account can be converted into a normal account.

To encourage Banks to open more 'No Frills Accounts', and also to extend the reach of IMPS, NPCI has taken steps to enable IMPS facility to 'No frills accounts', too.

Union Bank of India was the first bank to link IMPS to 'No Frills accounts'.

Yes, MMID is compulsory even for No Frills accounts', to avail the IMPS facility. The agents of Corporate Business Correspondent I.e FINO, will facilitate the process of obtaining MMID by account holders.

Top 5 Benefits of this facility:

1. Customers need not opt for mobile banking services.
2. The funds transfer is instant, as the IMPS works 24*7, 365 days a year.
3. No additional infrastructure is required by the Banks nor the account holders.
4. Reach or last mile connectivity issues are resolved, as Mobiles have penetrated almost every nook and corner of the country.
5. The additional spinoff will be for the mobile companies, as the customer's stickiness to their company will increase. This is because customer's having a MMID will not prefer to shift their loyalties elsewhere.

 

Mobile Banking – A tool for Financial Inclusion.

In the recent past, there have been demands to introduce Funds Transfer’s through Mobiles, outside the Banking Network, in India.

Proponents of this Proposal are of the view that such a product will aid in

01) Faster payment delivery channel.

02)                     Cheaper payment delivery channel

03)                      Efficient payment delivery channel.

They opine that the existing Bank led Model, is too restrictive/costly/not efficient.

In my opinion, a Bank Led model is more valid for our country, for the following reasons.

A non-bank led model is riskier from the Security Angel, as the transactions can be a front for illegal transactions. As the originator/receiver are mostly anonymous, it becomes difficult to trace the chain of funds, in case of any investigation.

Little drops become a Ocean. Single transfer of say Rs.1000/- day, translates into a transfer of Rs.30,000/- per month. And, Rs.30,000/- is a substantial sum.

 With concerns of Money Laundering and financial terrorism on the increase, a Bank led Model, is more attractive for Payment Delivery Systems than a Non-Bank led one.

As it is even without the Non-Bank Mobile Payment Delivery System, Money laundering prevails. Let us not provide Money Laundering, yet another Payment Delivery System!

I feel, Banks and Telecom companies and other stake-holders need to come together and develop innovate ideas to boost alternate delivery systems. This would be better, that exploring the options for a Non-Bank Payment Delivery System. A Non-Bank model too needs investment in terms of money, Software Development, Hardware Rollout.

Some Banks in India, are offering pure Internet Banking Accounts. Once the customer’s KYC norms are satisfied, a   Customer Master Number is created and provided to the customer. Basing on Customer Master Number, a customer can open accounts On Net Banking site of the respective bank.

The best example is ICICI ‘s Bank’s Branchless Banking.

This model can be accepted as a Base for true Mobile Banking, with suitable modifications. 

In fact, this model is also a can be adopted to enhance Financial Inclusion.

For No-Frills Account, this Model, will be a win-win situation for all the Stake Holders

01)                      For Bankers – They can open new accounts, without the need for physical branches.

02)                     For Customers – They have access to basic banking, which in turn will motivate them to experience the benefits of full banking services.

03)                     For Mobile Companies – This service might encourage customers to stay with a single mobile provider instead of jumping to their competitor.

The next obvious question is who will bear the costs. Of course, nothing in this world is free. The costs can be shared between the Banks and the Customers, with the Mobile Companies too underwriting a part of it.

Innovation in delivery models is the key to enhance Financial Inclusion.

Ideally, all Funds Transfer should be within the ambit of Banking Channels only.

Financial Inclusion: The need for out-of-box thinking.

Financial Inclusion: The need for out-of-box thinking.

What is Financial Inclusion:

Financial Inclusion is the delivery of banking services at affordable costs to vast sections of disadvantaged and low income groups. 

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Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India, at the  Seminar  20th SKOCH Summit 2009, Mumbai on July 17, 2009, has defined Financial Inclusion as

        “The process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players.”

Towards achieving FI, RBI has taken up numerous steps.

No-frills account, is seen as a major contributor by RBI, in its goal of FI.

The concept of ‘NO-FRILLS’ ACCOUNT, was first mooted by RBI in its Mid-term Review of Annual Policy Statement for the year 2005-06.

The first letter on this subject by RBI, is Lr.No. RBI/2005-06/204
DBOD.No.Leg.BC. 44/09.07.005/2005-06, November 11, 2005, addressed to All Scheduled Commercial Banks(Excluding RRBs).

Subsequently a similar letter was addressed to RRB’s and UCB’s also.

In RBI’s view, ‘NO-FRILLS’ ACCOUNT  is

QUOTE

basic banking 'no-frills' account either with 'nil' or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population. The nature and number of transactions in such accounts could be restricted, but made known to the customer in advance in a transparent manner. All banks are advised to give wide publicity to the facility of such a 'no-frills' account including on their web sites indicating the facilities and charges in a transparent manner.

UNQUOTE.

Wisely RBI has left it to the banks, to decide the minimum balances/fees/facilites to such ‘NO-FRILLS’ ACCOUNT .

However, it has advised Banks to report quarterly, the opening of such ‘NO-FRILLS’ ACCOUNT ’s

Common Points regarding ‘NO-FRILLS’ ACCOUNT ’s

However, while opening such accounts the customer should be made aware that if at any point of time, the balance in all his/her accounts with the bank (taken together) exceeds Rs.50,000/- or total credits in the accounts exceed Rs.1.00 lakh in a year, no further transaction will be permitted in the account until full KYC procedure in regard to verification of identity and address of the customer through the documents as specified are complied with.

IT Software is available to

n     Throw Alerts when the Balance in all the accounts of the customer in the Bank exceed Rs.40000/-. The Software is customizable.

n     Rejects any Credits(Transfer/Clearing/RTGS/NEFT), when the credits exceed Rs1lakh in a year.

The issue is of the cost of the Software.

Universal Observations about ‘NO-FRILLS’ ACCOUNT

01)                      The ‘NO-FRILLS’ ACCOUNT numbers are not impressive.

02)                     Also, in the ‘NO-FRILLS’ ACCOUNT opened so far, only a few accounts are active.

03)                     A decent Average Balance in the ‘NO-FRILLS’ ACCOUNT is due to balances in 20% of the ‘NO-FRILLS’ ACCOUNT. YES, the 80/20 funda, works here also.

Banks have been reluctant to encourage ‘NO-FRILLS’ ACCOUNT, due to the costs involved in Sourcing/Monitoring.

May be it is time, to offer Incentives to Banks to encourage them to open ‘NO-FRILLS’ ACCOUNT.

What could be the incentives and who has to offer them?

Well, the incentives have to be offered by Reserve Bank of India.

What could be the incentives?

1 BRANCH LICENCE SANCTION ANYWHERE IN INDIA, FOR EVERY 1 LAC ‘NO-FRILLS’ ACCOUNT, OPENED EVERY FINANCIAL YEAR.

What are the safeguards, to ensure only quality ‘NO-FRILLS’ ACCOUNT are opened.

n     A minimum of  5 transactions in a 6 month cycle i.e Half year ending 31^st March and 30^th September

n     Accounts closed within 1 year of opening, to be less than 10%.

Few Links to various Bank’s ‘NO-FRILLS’ ACCOUNT ’s offerings.

Please note that I am not canvassing for any bank, I am only interested in ePayments

http://www.icicibank.com/Pfsuser/icicibank/depositproducts/nofrillsaccount/nf_faq.htm

http://www.standardchartered.co.in/personal/accounts/en/no-frills-acc.html

http://www.hdfcbank.com/personal/accounts/savings_accounts/no_frills_account/nofrills_acc.html

http://www.iob.in/No_Frills_Account.aspx

http://www.axisbank.com/personal/accounts/azaadinofrills/Azaadi-No-Frills.asp

http://www.federalbank.co.in/content/DisplayContentDetails.aspx?id=645

http://www.barclays.in/consumer_banking/no_frills_ac.htm

http://www.chinatrustindia.com/frill.html

http://www.yesbank.in/savings_nofrillsaccount.htm

http://www.ucobank.com/deposit.htm

http://www.indorebank.org/nofrills.htm

http://www.online.citibank.co.in/portal/newgen/seo/banking/citigold/no_frills_account.htm

http://www.kotak.com/Kotak_BankSite/personal/deposits/sa_easy.htm

http://www.saraswatbank.com/view_section.jsp?lang=0&id=0,4,6,104

http://www.kvb.co.in/scripts/Common.asp?Page=nofrillcontent.asp

http://www.tmb.in/d_janatha.htm

http://www.lvbank.com/nofrills.aspx

http://www.csb.co.in/asp/0100text.asp?pageId=135&headId=135

http://www.allahabadbank.com/5-banking.asp

http://www.jkbank.net/customerSaveDepositSchemes.php

http://www.bankofindia.com/nofrill.aspx

http://www.abnamro.co.in/India/May-I-Help/Service-Ch/No-Frills/SOB-NOFRILLS.pdf

http://www.corpbank.com/asp/0100text.asp?presentID=392&headID=0

http://www.unitedbankofindia.com/deposit-schemes.asp#UnitedBasicSBAccount

http://www.bankofrajasthan.com/bor/wcms/en/home/personal-banking/deposits/accounts/small.html

http://www.statebankofmysore.co.in/downloads/depacs-bcsbi.pdf

https://www.obcindia.co.in/obcnew/site/inner.aspx?status=2&menu_id=28

http://www.canarabank.com/english/Scripts/DepositAccounts.aspx

http://www.bankofmaharashtra.in/whats_new.asp

‘NO-FRILLS’ Account’s, can improve the ePayments turnover of the Bank, as a Bank Account is mandatory to receive ePayments.