Indian Banks Tie With Mobile Operators for Rural Services

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Banking services over mobile phones in India are likely to take off with two large Indian banks tying up with large mobile service providers to increase their reach in rural markets.

State Bank of India (SBI), India's largest commercial bank, and Bharti Airtel, the country's largest mobile operator, said on Wednesday that they are setting up a joint venture "to make available banking services to India's unbanked millions".

SBI, which is majority government owned, plans to take advantage of Airtel's customer base of about 150 million and its 1.5 million retailers and distributors across India.

The details of the service are still being worked out and will offer a combination of online transactions using mobile phones and cash transactions at Airtel's customer service and retail points in rural areas, a spokesman for Airtel said on Wednesday.

ICICI Bank, India's largest private sector bank, also announced on Wednesday a tie-up with Vodafone Essar, the Indian joint venture of Vodafone, to offer financial products such as savings accounts, pre-paid instruments and credit products through a mobile phone platform.

ICICI Bank plans to take advantage of the distribution strength of Vodafone, which manages over 1.5 million retail points for acquiring customers and servicing them, the companies said. The companies did not disclose details, saying that both parties will work out specific arrangements in the coming few weeks and chart out a go-to-market plan.

One of the most pervasive utilities in India is mobile telephony, which sometimes reaches areas where there isn't electricity, said Kamlesh Bhatia, a principal research analyst at Gartner. Mobile service operators are an ideal channel for banks to take their services to remote areas of the country as part of their financial inclusion programs, he added.

Mobile operators are interested in getting involved in financial inclusion to boost value added services revenue, and also get customer loyalty, Bhatia said.

India's central bank, Reserve Bank of India (RBI), has been attempting to make it easier for Indian banks to reach rural people by allowing them to appoint "banking correspondents" to handle delivery of cash and accept cash deposits, opening of new accounts and other services for rural users in remote locations where there are no bank branches.

Once these banking correspondents are in place, customers in urban areas can send or receive funds using mobile phones to relatives or business associates in the villages.

The RBI amended the rules for banking correspondents in September to allow "for profit" companies to do the job, besides individuals, non-governmental organizations, cooperative societies and post offices.

The joint venture between Airtel and SBI will act as a banking correspondent for SBI under the new rules, extending the reach of SBI in rural markets.

Almost half of India has no access to banks and of the 600,000 villages in the country, only about 50,000 have access to finance, according to RBI estimates in November.

Before mobile banking can take off, banks, mobile operators, and the telecom regulator have to work out a regulatory framework in information management, security and customer authentication, Bhatia said. The Indian banking sector is heavily regulated and a common approach will have to be evolved to ensure that mobile banking does not compromise bank regulations, he added.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is

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