Saturday, April 21, 2012

Savings bank accounts can be portable soon

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AFTER life and non-life insurance, number portability on mobile phones, now, the government may allow you and me to move our savings bank accounts from one bank to another with same number.

This is apparently aimed at allowing savings bank customers to move to best service providers in a cost-effective way and ensure higher returns on their deposits.

Portability of savings banks accounts would also encourage competition among banks and allow deposit holders to make the most after savings rates were deregulated by the Reserve Bank of India (RBI) recently.

"We want to do it (savings account number portability). Right now, there are some technical problems.…We have identified them. We will overcome them soon," financial services secretary D K Mittal told reporters in the capital on Tuesday.

Banks would have to work on identification code, know your customer (KYC) norms and core banking solution (CBS) for implementing the savings bank account number portability, Mittal said.

"It is a good concept and it will help customers and sort out a lot of issues for them, if they are allowed to port their savings account with the account number.

For instance, if a customer ports a savings account, KYC checks will be simplified and it will be much easier for him to open an account," said P Sitaram, chief financial officer, IDBI Bank.

SBI and a few other public sector banks, however, said that savings bank account portability would be a hard task because banks will have to renumber the 500 million savings accounts in India. Like financial inclusion, this will be an added burden on banks. But, experts said savings bank account portability will force banks to offer similar interest rates on a savings account, which is not the case now. In addition, it will lead to a huge improvement in service delivery in PSU banks because they will be at risk of losing customers.

"Theoretically, it is a sound concept. To implement it is an Herculean task as it will mean renumbering of the existing savings bank accounts," a senior SBI official said.

"We at SBI have about 130 million accounts. Assuming that it is about 25 per cent of total accounts, there would be about 500 million savings accounts in India that will have to be renumbered." Savings bank account portability will be a costly exercise and will be confusing for customers. Another point of confusion will be on KYC norms, the SBI official said.

A Srinath, head of retail loans at Bank of Baroda, said, "The number portability is good, but, we need to have the necessary technology for it."

 

 

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