H R Khan: Financial inclusion and payment systems - recent trends,
current challenges and emerging issues
Detailed version of the presentation by Mr H R Khan, Deputy Governor of the Reserve Bank
of India, at the BANCON 2012, organised by the Bank of Maharashtra and the Indian Banks'
Association, Pune, 25 November 2012.
* * *
The speaker acknowledges with thanks the contributions of Shri Simanchala Sahu, Shri G Srinivas & Shri Surajit
Bose of the Reserve Bank of India.
Shri. Narendra Singh, CMD, Bank of Maharashtra, Shri. K R Kamath, CMD, Punjab National
Bank & Chairman, Indian Banks' Association, Shri Raghuvir Singh, Executive Director, Bank
of Maharashtra and Chairmen-Managing Directors & Executive Directors of banks,
distinguished delegates, ladies and gentlemen. It is indeed a pleasure to be here in
BANCON 2012 organised by the Indian Banks' Association. I am especially happy to share
my thoughts on financial inclusion & payment systems in this conference hosted by the Bank
of Maharashtra which has been a pioneer in implementing Information Communication and
Technology (ICT) based financial inclusion. I am particularly reminded of a reference made
by the bank to the Reserve Bank of India way back in late 60s' seeking permission to use
agents for providing banking services & the opinion given by the Legal Department of the
Reserve Bank of India which formed the basis for allowing Business Correspondents to
expand banking outreach with ICT support in 2006 as recommended by the Internal Group
on Rural Credit & Microfinance set by the Reserve Bank of India in 2006.
Financial inclusion as a concept, process and business proposition is not new for the banking
sector of India and, in fact, it dates back to the phase of nationalization of banks and even
beyond that when the Imperial Bank was nationalized to become the State Bank of India in
1955 and its subsidiaries were formed following the recommendations of the All India Rural
Credit Survey Committee (AIRCS) in 1954. One of the objectives of nationalization was
aimed at taking banking to the masses. Financial inclusion, thus, has been and continues to
be at the centre of the policy priority of the country. With passage of time the means of
achieving deeper and sustainable financial inclusion has shifted towards innovative methods
and adoption of technology-led products. In this changed environment, Payment Systems
(PS) have become a critical component of financial inclusion for bringing the unbanked into
the formal banking channels, particularly as we move towards the second phase of financial
inclusion that aims to cover the villages with population of less than 2000. I am therefore very
happy to have got this opportunity to speak on the payment system and financial inclusion in
this conference which is focused on "innovating to unlock the next decade of banking". I
intend to highlight the recent trends, the current challenges and the emerging issues in
fostering new payment methods and instruments with focus on the inter-linkages between a
robust payment system and a sustainable financial inclusion.
Role of payment systems in financial inclusion
Global Partnership for Financial Inclusion (GPFI), a forum of G20, defined financial inclusion
as "a state in which all working age adults have effective access to credit, savings, payments
and insurance from formal service providers." "Effective access" involves convenient and
responsible product and service delivery channels at a cost affordable to the customer and
sustainable for the service provider so that the financially excluded population uses the
formal financial services rather than the informal channels that provide convenient but costly
services on near 24x7 basis. An efficient and ready-for-future payment and settlement
system is expected to act as a catalyst to ensure this effective access and increase the pace
of financial inclusion.
Payment System Vision 2012-15
The Payment System Vision Document: 2012-15 of the Reserve Bank envisages to
proactively encourage electronic payment systems for ushering in a less-cash society in
India. The vision is to ensure payment and settlement systems in the country are safe,
efficient, interoperable, authorised, accessible, inclusive and compliant with the international
standards. Payment systems would be driven by customer demands for convenience,
ease-of-use and access that will propel the necessary convergence in innovative e-payment
products and capabilities. Integration of various systems through unified solution architecture
and current technology would lead to adoption and usage of resilient payment systems.
Regulations would enable channelizing innovations and competition to meet these demands
consistent with international standards and best practices. The overall regulatory policy
stance would be oriented towards promoting a less-cash/less-paper society, in a way a
"green" initiative. The emphasis would be on the use of electronic payment products and
services that can be accessed anywhere and anytime by anyone at affordable prices. Thus,
the seven cornerstones of financial inclusion, i.e., Accessibility, Availability, Affordability,
Awareness, Acceptability, Assurance and Appropriateness have been incorporated as
basic principles to enable payment system to play a role of catalyst in furthering financial
inclusion.
Payment system as catalyst and enabler for financial inclusion
The process of financial inclusion is influenced by both demand and supply side factors.
Demand side factors include financial literacy and awareness, felt need for the products,
credit absorption capacity, etc. On the other hand factors, such as, product availability,
delivery methods, service providers, etc. influence the supply side. Payment systems have
the potential of acting as a catalyst on the supply side of financial inclusion by way of
appropriate designing and efficient delivery of products, processes and systems. In one of
the recent surveys of the World Bank,1 more than 100 countries reported nearly 170 plus
innovative retail payment instruments and methods being used for enhancing financial
inclusion. Some of the common products involved Person to Business (P2B), Person to
Person (P2P) and utility bill payments and a small proportion also reported tapping the
payment system for transfer of government benefits. It was observed that innovative
payment instruments & methods were drivers of financial inclusion in nearly 14 per cent of
the countries surveyed.
In sync with the international developments, India has also been witness to some efficient
and effective innovations - both in the field of access channels and products. In the payment
system landscape of the country, the Reserve Bank of India acts as regulator, supervisor
and, also at times, as a service provider. Certain major payment systems initiatives, such as,
ECS, NEFT and RTGS have been game changers that have helped millions of people to use
electronic medium for faster transfer of money from one place to another, and, to a large
extent, the Reserve Bank played a critical role in the development of these products. It has,
however, been observed that benefits of these facilities have not yet reached the vast
segments of the population who are unable to access formal banking channels. The
Business Correspondent (BC) based business model using low cost ICT has opened up an
opportunity for the banking sector to provide appropriate payment system products at
affordable cost. The continuous shrinking of prices of ICT based solutions can be used to
provide the financial services using multiple delivery channels, such as, ATMs, kiosks,
mobile phones, internet and contact and contactless cards through PoS. Innovations in
product design and delivery channels have provided a fillip to the process of financial
inclusion and the need for deeper and search for sustainable financial inclusion has paved
way for many innovations. Traditional payment services no longer make a business case for
large volume of small ticket transactions. This has led to many innovations, such as, special
bank accounts or pre-paid accounts, use of BCs, use of technology for initiating and
authenticating transaction, etc. At the same time, it is important to realize that innovations
have taken place and have been successful due to initiatives of all the stakeholders,
partnerships of banks and non-banks and creation of an enabling business environment by
the regulator and in the process have opened up new avenues for tapping the unreached
markets.
International approach
Some of the international experiences in this regard are worth mentioning to draw useful
lessons that can be implemented in our country in the existing policy environment for
financial inclusion. Countries like China, Brazil, South Africa, Mexico, Kenya and Philippines
have implemented various technology-based financial inclusion programmes and their
success stories have been replicated in various countries albeit with modifications based on
local needs. Internationally, there are different approaches towards delivery of payment
services to the unbanked and under-banked customers using innovative methods. For
example, the BC model with traditional PoS devices and cards is used in Brazil and China.
The Mobile based payments are extensively used in Kenya, South Africa, Philippines and
Mexico. A few countries like the USA and China use pre-paid payment cards as an
instrument to provide payment and banking services to the unbanked population. Broadly
there are three models: (i) bank-led model (e.g. Brazil/South Africa), (ii) non-bank led model
(e.g. Kenya), and (iii) hybrid model (e.g. Philippines). These models have evolved taking into
account the factors like banking penetration in a country, levels of literacy, availability of
necessary eco-system, etc. In the context of technology-enabled financial inclusion the
success stories of Brazil, Kenya and Philippines are often quoted. Let me briefly mention
about their business models.
Brazilian banking correspondent model
Brazil adopted a "correspondent" banking model to expand the reach of banking services to
its remote areas. The success of this model can be gauged by the fact that while there were
63,509 agents in 2000, their number had grown to 132,757 by January 2010. This enabled
the spread of banking and financial services to even the far-flung areas of Brazil. The PoS
devices with cards are used for providing a wide range of services from deposit taking,
money transfers, opening accounts, bill payments, verifying and forwarding documentation to
provide credit, etc. This wide network has also helped in the delivery of government benefits
to families covered under the Bolsa Família programme. It enables the beneficiaries to
withdraw their benefits locally, without having to travel long distances and has resulted in
reducing the transaction costs to the government in providing social payments.
Kenyan non-bank MNO model
In 2006 one of the leading mobile operators of Kenya launched M-Pesa, an m-commerce
payment service, aimed at the unbanked. M-Pesa enables customers to exchange cash in
return for an e-money account which is stored on the server of a non-bank, such as, a mobile
operator or an issuer of stored-value cards. The balance can be used for making payments,
storing funds for future use, transferring funds or converting back to cash, etc. In Kenya, the
latest available data shows that the number of M-Pesa mobile phone money transfer service
users is around 14 million. Its agent network has also increased to close to 28,000 outlets.
The M-Pesa model has been a major success in providing mobile payment services,
especially for remittances to the Kenyan citizens. In neighbouring countries, however, the
quest to replicate the model has proved to be quite challenging and has not been as
successful. One of the primary reasons attributed to the difference in the levels of success in
Kenya as compared to other neighbouring countries is the existence of only one dominant
Mobile Network Operator (MNO) in the country.
Philippines hybrid model
SmartMoney was launched as a remittance product by an MNO (viz. Smart) in partnership
with a commercial bank (viz. Banco d'Oro). While the MNO managed the brand and
execution of the service, the underlying product was akin to a pre-paid account of the bank.
This was a classic example of bank-supported model where the MNO assumed product and
marketing leadership. Unlike SmartMoney, the fundamental difference in G-Cash, another
product launched in Philippines, was that the G-Cash model did not have a bank to assume
direct liability for the deposits of customers. This was due to the fact that G-Cash was itself
the issuer of the mobile money account. In other words, this was a non-bank led model. The
retail accounts were actually held by a wholly owned subsidiary of the MNO, and, therefore,
somewhat ring-fenced from the operational cash flows of the MNO although in reality the
MNO was assuming liability for a type of deposit. The aggregate balances of G-Cash would
however be held as deposits in banks that are regulated by the central bank of the country.
The above examples illustrate the use of different methods to further the goals of financial
inclusion. While in the case of the Brazil it is the PoS device along with the card (a somewhat
traditional mode) with the business correspondent which is enabling financial inclusion in
Kenya and Philippines, it is the mobile technology which is driving this effort. As can be seen
from these examples, policymakers and regulators, especially in developing countries and
emerging markets, are adopting different models to reach to unbanked and under banked
customers taking into account the regulatory comforts based on financial sector eco system
and security in providing safe payment systems using different technologies.
The Indian reality and the policy approaches
If we consider our own banking eco-system, it has about 95,000 branches, about equal
number of ATMs across the country and 278 million debit cards. Yet a large proportion of our
population remains financially excluded. Data indicates that only about 40 percent of the
adult population in the country has a bank account; only 25,000 plus villages have a bank
branch out of the 600,000 villages in the country. Only 13 percent of the people have a debit
card and only two percent have a credit card. The same low level of penetration is seen for
both life and non-life insurance products. The select indicators of financial inclusion (Table)
also prove that India has a long way to go in achieving the desired levels of financial
inclusion.
As the Indian financial system is pre-dominantly led by banks, the financial inclusion policy
orientation has naturally been biased towards the bank-led model. The non-bank entities,
however, play an important role in providing necessary support to expand the reach
particularly for the banks, crossing the proverbial last mile. The issue is given the geographic
spread of the unbanked and the low level of financial literacy, how do we step up the public
policy objective of financial inclusion? One eminently feasible way to overcome the challenge
is by tapping existing and innovative technologies, especially in the realm of payment
systems. This can be accomplished by providing access to the formal banking channel for
activities, such as, remittances. Another method could be to provide alternate payment
instruments, other than cash, for both P2P and P2B payments, such as, prepaid payment
instruments (PPI). The payment systems, thus, can be considered as effective tools working
on the supply side of financial inclusion by providing products and systems for fulfilling the
payment needs of the financially excluded while the demand side is propelled by the desire
of the excluded segment to make use of formal banking channel for their banking and
payment needs. The Reserve Bank of India and the Government has been working to create
an enabling environment for providing payment system infrastructure and services as supply
side response to emerging demands for deeper financial inclusion arising out of heightened
awareness, requirement of the Financial Inclusion Plans (FIP) being implemented by banks
& the moves of the Government to electronically transfer large number of
benefits/entitlements to the citizens.
Use of business correspondents (BCs)
One of the major experiment as the supply-side enabler for financial inclusion has been the
Business Correspondent (BC) model. The BC model is meant to be a low cost alternate to
the brick and mortar banking network with an ability to reach the unbanked/ under-banked
population. In spite of the difficulties faced while implementing the first phase of FIP, as on
September 30, 2012 banks could open 1,58,159 BC outlets providing access to financial
services in 1,99,702 villages in the country. This initial period of test and learn phase has
made the stakeholders understand the issues involved. The experience, thus, gained has
enabled evolution and further rationalization of the policy framework. There are, however,
constraints which have to be addressed effectively for the successful implementation of the
BC model. I would not dwell on them here except to state that all the stakeholders are
determined to overcome them as they gear up to meet the challenge as we embark on
second phase of financial inclusion under which all villages with the population of less than
2000 would be covered. Going forward, the challenges would be leveraging the products &
processes now available or on the anvil (e.g. integration of financial inclusion server with
CBS server, implementation of inter-operable micro ATMs, resource sharing with other banks
and non-banks, use of RFID technology, expanded usage of Aadhaar enabled infrastructure,
etc.) and adapting the innovations that can not only enhance the FIP but also prove to be a
sustainable business model. This would require answers to questions, such as, whether
banks need to innovate by tapping their own infrastructure and resources or is there a
business case in setting up shared infrastructure. I am sure that innovations through such
collaborations would definitely unlock the immense business potential that the Bottom of the
Pyramid (BoP) customers offer through the ICT based BC model.
Aadhaar-enabled unified payment infrastructure
Here I would like to specifically touch upon the Aadhaar-enabled unified payment
infrastructure. The issue of direct transfer of subsidies (DTS) and electronic benefit transfer
(EBT) from the Government to the intended beneficiaries has been in focus of the
policymakers in the recent times. Both the schemes are based on an innovative approach of
using Aadhaar based platform as a unique financial address for transferring financial benefits
to the accounts of beneficiaries and helping them to withdraw/use such benefits as per their
convenience. The mechanism involves tapping the existing banking channels including the
BC network to route all payments electronically to the accounts of the beneficiaries using
Aadhaar as an authentication mechanism. BCs would be equipped with micro-ATMs and
undertake transactions on the basis of Aadhaar number and bio-metric authentication. The
financial transactions are routed through the Aadhaar Payments Bridge. The
Aadhaar-enabled Payments System (AEPS) using micro-ATMs enables the beneficiaries to
operate these accounts for withdrawal, deposit and remittance purposes. The volume of
transactions that are likely to be routed through the AEPS is expected to register an
exponential growth. The report of the Task Force on Direct Transfer of Subsidies (DTS)
(Chairman: Shri Nandan Nilekani) highlights the huge business potential this eco-system
presents to the stakeholders with electronic benefit transfer/DTS payments adding upto
roughly 3.5 per cent of the GDP and another ₹one trillion estimated as business
opportunities in the form of domestic remittances. Given such large numbers, we are looking
at huge transaction volumes. The issue, however, is whether the industry is geared for this
expected surge in volumes by pro-actively taking measures to upgrade the processing
capacities, mapping Aadhar with beneficiary account numbers and working in collaboration
with Central and State Governments to digitize the data bases in quickest possible time.
Mobile penetration
Given the high level of acceptance and penetration of the mobile telephone in India, there is
a case to further leverage this for providing banking services to the people at the bottom of
the pyramid. Worldwide it has been recognised that the mobile telephony has the potential to
universalise access to banking and payment services in a low-cost and seamless manner to
the existing and potential customers. Latest data released by the Telecom Regulatory
Authority of India (TRAI), the mobile subscriber base of the country as at end-October 2012
is 904.23 million with the urban subscribers accounting for 62.68 percent (566.81 million) and
the rural subscribers for 37.32 percent (337.42 million). Available data indicates that the use
of mobile banking services amongst this huge base of subscribers is, however, very low.
Even amongst the existing bank customers, less than one per cent are covered under the
mobile banking services. Notwithstanding the existing low base of customers, the growth in
mobile banking transactions has shown an increasing trend. For example, in the month of
October 2012, 4.44 million transactions amounting to ₹4.97 billion were processed as
compared to 2.25 million transactions amounting to ₹1.61 billion processed in October 2011
- an increase of about 197 per cent in volume and approximately 308 per cent in value
terms. It is, however, evident that the potential of mobile banking technology is yet to be fully
exploited, even though the numbers may look impressive. It is also evident that mobile
banking is yet to gain the critical take-off stage that would propel it to provide
banking/payment services at a cheaper, secure and seamless manner to the existing and
potential customers.
Interbank Mobile Payment Systems
The Interbank Mobile Payment Systems (IMPS) is a mobile based payments system and is
owned and operated by the National Payment Corporation of India (NPCI). The IMPS
facilitates access to bank accounts and transfer of funds through mobile phones. The
system, launched in November 2010, provides real time transfer of funds between the
customers of different banks on 24x7 basis. Initially enabled only for P 2 P remittance, NPCI
has been given approval to use this innovative payment system for Person-to-Merchant
(P 2 M) payments as well. This is expected to give a fillip for IMPS usage. Pilots are on to
use IFSC code and bank account number or the Aadhaar number of the beneficiary for
money transfer using IMPS. This important development is expected to make it easier for the
customers to use IMPS as it is no longer a requirement that the beneficiary mobile number is
registered with the destination bank and there is no requirement for a Mobile Money Identifier
(MMID) for the beneficiary customer. IMPS has also been enabled for usage over ATM and
internet banking. The existing two factor authentication for both these channels have to
invoked while making payments through IMPS, viz. card plus PIN for ATM and user ID plus
net banking/transaction password for internet banking. In view of its multi-channel
capabilities it has now been rechristened as IMmediate Payment Service. NPCI is now
attempting to provide frontend consolidation to banks in the form of common Unstructured
Supplementary Service Data (USSD) platform to enable the users to use low end mobile
handsets that do not require any specific application to do mobile payments/banking. These
innovations in IMPS are expected to promote mobile banking transactions in the country in a
big way.
Electronification of KCCs
The smart card linked, mobile based and Aadhar enabled KCC, popularly known as m-KCC,
was launched in July 2012 and is seen as a great example of harnessing the latest
technology for user friendly applications for financial inclusion of farmers. Anecdotal
evidence, however, indicates that banks are yet to launch the product in a big way. Another
Rupay Kisan Credit Card
similar experiment relates to the launched by the NPCI. The banks
certified to issue such cards are found to be issuing only ATM cards and not Rupay debit
cards. The PoS terminal network which has crossed 0.6 million has low acceptance of Rupay
Rupay
cards. The lack of infrastructure is causing limited use and acceptability of cards. It is
rather surprising to note the lackluster response of the banks and their inability to identify the
business potential in such innovative products.
Access criteria
To facilitate wider access to payment systems both centralised (viz. NECS, NEFT and
RTGS) and decentralised (viz. MICR, ECS, RECS), membership criteria have been
rationalised and made open to all licensed banks. An alternate mechanism of
sub-membership has also been opened for accessing centralised payment systems for all
licenced banks like the Regional Rural Banks and Co-operative banks which have the
capabilities but are not participating in centralised payment systems on account of either not
meeting the access criteria or because of cost considerations. The sub-membership route
has been provided to expand the reach to all banks even those located in smaller centres.
This is expected to deepen the reach of the electronic payment systems and provide the
benefit of modern electronic payments to people in smaller centres as well.
Domestic money transfer
Relaxations in domestic money transfer guidelines have been made to provide remittance
facilities in a safe, secure and efficient manner targeting particularly the large migrant
population. Three schemes involving cash pay-out/cash pay-in and card-to-card transfers
have now been made available. These schemes are; (a) cash pay-out arrangement for
amounts being transferred out of bank accounts to beneficiaries not having a bank account
with a transaction cap of ₹10,000 subject to an overall monthly cap of ₹25,000 per
beneficiary; (b) facility for walk-in customers not having bank account (e.g., migrant workers)
to transfer funds to bank accounts (of say, family members or others) subject to a transaction
limit of ₹5,000 and a monthly cap of ₹25,000 per remitter; and (c) facility of transfer of funds
among domestic debit/credit/pre-paid cards subject to the same transaction/monthly cap as
at (b). The first two schemes involve a bank account at one end of the transaction for
facilitating fund transfers. Simultaneously, the customer charges have been rationalised,
especially for amounts upto ₹10,000 in NEFT & the same has been now capped at ₹2.50.
Taking advantage of these policy measures, one of the banks has implemented a "green
channel card" for walk-in customers who regularly send money to a particular account. Under
the scheme, details of name and address of a walk-in customer alongwith the beneficiary's
name, account number and the IFSC code of the beneficiary's branch are captured on a
mag-stripe card. The cardholder can swipe the card at a branch/ATM/kiosk of the bank and
remit money to an account holder of any other branch of the bank. This mechanism helps in
avoiding repetitive filling up of forms by a walk-in customer & lowering the operational risk
involving transactions based on inaccurate data in a cost effective manner.
Rationalisation of Merchant Discount Rate (MDR) for debit cards
Debit cards in India far outnumber the number of credit cards in India. Their usage, however,
reflects that they are predominantly used at ATMs to withdraw cash and not used at
merchant establishments probably due to the lack of depth of penetration of PoS, terminals,
especially at smaller merchant locations. This is on account of the fact that the MDRs for
debit and credit cards were uniform and acted as a disincentive. This was somewhat strange
given that a debit card is a secured product while a credit card is part of the unsecured credit
product portfolio of the banks. To encourage the acceptance of debit cards at smaller
merchant terminals, Reserve Bank has introduced a differential MDR for debit card
transactions. A lower MDR is expected to act as an incentive to even the smaller merchants
to accept card payments as the fee payable by them to the acquiring bank would be
relatively small. As the policy measure has been recently unveiled, the Reserve Bank is
keenly watching the market for further developments.
Rationalisation of PPI guidelines
To provide a boost to cash-less transactions and bolster the issuance of semi-closed PPIs,
the five categories of semi-closed PPIs have been replaced with three broad categories. The
first category of instruments up to ₹10,000 can be issued in electronic form with minimum
details of the customer. Total outstanding at any point of time and total value of reloads in a
month cannot exceed ₹10,000, the second category of instruments, which can vary from
₹10,001 to ₹50,000, can be issued in electronic but non-reloadable form by accepting any
"officially valid document" defined under Rule 2(d) of the Prevention of Money Laundering
Act and in the third category instruments upto ₹50,000 can be issued with full KYC and can
be reloadable in nature. We have taken these measures in order to deepen the semi-closed
PPI market in the country and facilitate small value transactions without involving bank
accounts. Consequent upon such relaxations, all the three categories of PPIs can be used
for domestic money transfers. There is thus tremendous scope for the non-bank PPI issuers
and banks to work together to facilitate domestic funds transfer. The issue, however, is if the
banks and non-bank issuers of PPIs are in a position to forge meaningful partnerships.
Without such partnerships taking root, domestic remittances through this channel will not
materialise to the extent that they should. In such a scenario, the PPIs will continue to be
used for the limited purposes that they are being used today and would not really aid in
financial inclusion.
Role of non-banks
Subsequent to the enactment of the Payment and Settlement Systems Act, 2007 the
Reserve Bank has authorised non-banks to enter the retail payment space. The non-banks
have pre-dominantly gravitated towards PPI issuance and it is hoped that the recent
rationalisation of the PPI guidelines, as mentioned earlier, will spur their efforts in increasing
non-cash transactions in the economy. Given that semi-closed PPIs can be used for funds
transfer, we are keenly awaiting the developments in this area. Non-banks have now been
allowed to set-up and operate ATMs under the scheme of White Label ATMs (WLAs). This
has been done to increase the penetration and deployment of ATMs, especially in the
smaller Tier III to Tier VI centres, thereby extending anytime, anywhere banking facility to a
wider segment of population. But for this venture to succeed there has to be a
complementarity between the banks and non-banks. Unless the financially excluded are
brought into the ambit of banking and cards are issued the infrastructure in the form of ATMs
will remain unutilised. Further, the ATMs, existing & those in the pipeline, need to have the
facilities for multiple utilities so as to reduce the demand for cash & provide value added &
cost effective services to the customers.
Policy measures on the anvil
I shall now briefly touch upon some of the policy measures which are on the anvil to fasten
the process of financial inclusion through supply side payment system enablers. As I have
mentioned earlier, one of the key variables as one can notice in our Payment System Vision
document is the emphasis on promoting access and inclusion. To this end, the Reserve
Bank has indicated an intention to provide a regulatory framework for the introduction of
technology based innovative products for the use of all. Reserve Bank has also noted the
need for ensuring the availability of low-cost and safe domestic remittances to large number
of unbanked population and migrants through appropriate technology and affordable cost
has also been emphasized.
The proposed introduction of International Bank account Number (IBAN) /Basic Bank
Account Number (BBAN) is expected to result in efficiency in the system through introduction
of a single parameter (i.e., the account number) that would replace different types of
bank/branch codes (e.g., IFSC, BSR code, MICR code, SWIFT BIC code, etc.). IBAN's
prima