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Cellphones to improve bank penetration

The government has sought suggestions from various stakeholders to increase penetration in rural telephony, which could help expand banking network, Mahua Venkatesh reports.

india Updated: May 15, 2010 01:48 IST
Mahua Venkatesh

The government has sought suggestions from various stakeholders to increase penetration in rural telephony, which could help expand banking network.

An action plan for the next five years is expected to be laid down and the government would soon begin the consultation process.

Banks are keen to use the mobile phone technology to extend the scope of financial inclusion.

An inter-ministerial group is presently discussing the broad contours of a technology and regulatory architecture of delivering banking services through mobile phones.

Present guidelines allow mobile phone users to deposit up to Rs 5,000 with telecom operators that can be used for merchant transactions, but no physical transfer of funds is allowed outside of the banking system.

The objective is to use the 500 mobile phone connections as instruments of spreading banking services across the country, especially in rural areas. Concerns, however, have been raised over national security and absence of an efficient regulatory model.

The government has drawn out a grand scheme to connect nearly five lakh villages across the country with high-speed wireless broadband Internet connectivity in the next five years. “We are beginning a consultation process with key stakeholders to crystallise the thrust areas for the strategic plan,” said an official, who did not wish to be identified.

In the initial phase, about two lakh villages in 5,000 blocks would be connected. Villages located in blocks and talukas, where necessary infrastructure in the form of tower and power is available, would be identified for rolling out the network. There are two lakh such villages.

In recent months, the government has held discussions with telecom operators, Internet service providers, and others to formalise modalities of tender procedures, technology selection, and benchmark settings, an official said.

Among other things, the broadband network would connect all panchayats or elected council of village elders, across the country. Out of about 2.5 lakh panchayats across the country, only 30,000 have been provided with broadband connectivity, so far.