RBI’s S.S. Mundra pushes for account number portability

Mundra argues that customers should be able to move seamlessly between banks without having to change their account numbers


Mumbai: The Indian banking sector is well-placed to move towards account number portability, said Reserve Bank of India deputy governor S.S. Mundra, speaking at Mint’s annual banking conclave in Mumbai.

Drawing a comparison to the telecom sector, Mundra argued that customers should be able to move seamlessly between banks without having to change their account numbers, should they be dissatisfied with the services offered by their bank.

“Why not become a global first in this? This will give competition a whole new dimension,” said Mundra while calling on banks to support this objective.

The three pre-requisites for such account portability would be a shared payment system, a unique identity and a central clearance system.

In the case of India, Aadhaar can be used as a unique identity and the National Payment Corp. of India (NPCI) Ltd can act as a central payment system, he said.

“We are well-placed to move towards account number portability and the industry should debate this,” said Mundra.

The RBI deputy governor also called on banks to consider the disruption possible through blockchain technology.

Blockchain is essentially a distributed database used to make secure transactions that is currently being used by cryptocurrencies such as Bitcoin and helps in authenticating transactions.

A number of global banks have been working with blockchain technology to find uses for it in traditional banking businesses.

On 1 February, Financial times reported that JPMorgan Chase & Co. has begun a trial project using blockchain technology to cut the cost of trading.

Speaking on increasing competition from non-bank sources of funding, Mundra said that increasingly, large corporations will borrow from sources other than banks.

This has already been seen last year when large corporates started to borrow from the markets rather than banks, where rates were lower.

“As the economy matures, more and more large corporates will move towards alternate sources of funding,” said Mundra.

“This will leave a void which will be filled by lending to retail and small and medium enterprises,” Mundra added but cautioned that banks will need to develop credit appraisal skills needed to these specific segments.

A red flag was also raised by the RBI deputy governor on dealing with the new accounts opened under schemes like the Jan Dhan Yojana. Banks must do constant Know Your Customer (KYC) checks and ensure that these accounts are not misused, said Mundra.