RBI urges banks to gear up for account portability

Reserve Bank of India (RBI) deputy governor S S Mundra on Tuesday pushed banks to speed up account portability, allowing customers to change their bank seamlessly without having to change their account numbers.

Mundra said inter-bank account portability will result in customers being able to easily move away from one bank to another and advised banks to prepare for this eventuality.

He said that digital banking will play a huge role in enabling bank accounts to be ported with the same ease as mobile phone numbers, adding that the extensive efforts by the National Payments Corporation of India (NPCI) with development of apps like Bhim, IMPS and UPI among others have made portability possible. He called upon the Indian Bank Association (IBA) to take adequate measures to facilitate bank account portability.

The RBI in a 2012 notification had asked banks to allow intra-bank account portability in cases where KYC (Know Your Customer) has been ascertained.

He also said the central bank would soon come out with final guidelines on customer protection to limit their liability in case of fraud in electronic banking transactions.

Technological innovation and linking accounts to Aadhaar, the ID number issued by the Unique Identification Authority of India, have made it easier to move towards account number portability, the deputy governor said at an event organised by the Banking Codes and Standards Board of India.

Mundra also cautioned banks against charging higher rates on services.

''With technological advancements in the field of payment system such as UPI (unified payments interface) etc coupled with massive enrolments under Aadhaar and their linkage to individual bank accounts, it (account number portability) has come within the realms of possibility,'' said Mundra.

''As such, the prospect of an aggrieved customer silently moving her account to another bank in the near future has become very real,'' he said.

This is not the first time that Mundra has broached the topic of account number portability, The Hindustan Times points out. In February 2016, while delivering the keynote address at Mint's Annual Banking Conclave, Mundra had said that allowing account portability would ''give competition a whole new dimension''.

Currently, bank account number portability doesn't exist anywhere in the world.

Based on feedback received from stakeholders, final guidelines are expected to be issued shortly, Mundra said, asking banks to tighten IT systems.

In India, mobile phone subscribers are allowed to port their numbers while the Insurance Regulatory and Development Authority of India is considering allowing life insurance policy holders to switch from one insurer to another without surrendering their existing policies.

But bankers and other experts aren't quite convinced that this could be done easily. They say inter-bank portability of bank account numbers will cause a huge disruption, leading to fierce competition in the banking industry.

A big hurdle will be the multiple account number formats. For instance, an ICICI Bank savings bank account has 12 digits, while accounts at Citibank have 10 digits and at HDFC Bank, 14.

Business Standard points out that the Financial Conduct Authority (FCA), a financial regulatory body in the UK, issued a report in 2015 on models for implementation of account number portability. Following this report, a number of countries considered allowing inter-bank portability. However, there has been no further development to date due to the recalcitrance of banks as well as excessive projected costs of implementation.

However, in India with Aadhaar being promoted as the central identifier repository and NPCI as the central payments system that inter-bank portability may be more feasible.