Mumbai: Sending money home for millions of migrant labourers may become a lot cheaper and faster if the recommendations of an IIT panel are adopted by RBI and public sector banks. The IIT study has shown how existing infrastructure could be used for instant transfer of small amounts at a reasonable cost.
The reason why the report gains significance is that the earlier recommendations made by the author of the report—on allowing free access to all ATMs and on reducing charges on debit cards— were accepted by RBI. In the latest report: "Including the poor-—need for reforms in remittances," Ashish Das of the department of mathematics at IIT-Bombay, estimates the domestic remittance market to be around $10 billion in 2007-08, 60% being inter-state transfers and 80% directed towards rural households. However, 70% of these remittances are estimated to be channeled through the informal sector even though banks have a robust system for instant and low-cost funds transfer.
According to the report, there is a need to showcase the existing interoperable platform of cash-national electronic funds transfer (Cash-NEFT) which allows even a non-customer to walkin and deposit cash in a bank branch in India for credit of the funds in any other bank's account. NEFT is used extensively by those who practice online banking. However, for those not familiar with electronic channels remitting funds by depositing cash in a bank branch continues to be a huge challenge.
At present, bank charges for depositing cash into a bank account from a nonhome branch counter is more than the charges to do cash-NEFT. "With RBI mandating a low charge of Rs 2.5 or Rs 5 for even Cash-NEFT, it may not be viable for banks to offer this product and they invariably resort to varied tactics to avoid accepting cash under NEFT," the report said.
One of the most innovative suggestions in the report is the possibility of a reverse debit transaction using a card swipe machine. The report suggests that workers should be allowed to hand over cash to a merchant with a point of sale (card swipe machine) with the money being sent to the account of the cardholder. To promote such a system, the report recommends that urban business correspondents of banks should be provided with PoS machines to facilitate such remittances.
The panel has recommended that since most banks have started offering unique account numbers to customers, the need to provide branch codes could be discontinued. Second, the report suggests that since regional rural banks now have access to computer systems of their sponsor banks, there should be a system where a migrant can deposit funds in any branch in a city and have the money sent to the rural branch using Cash-NEFT.  |
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