The mobile remittance service, which has done wonders in other emerging market economies such as Kenya and the Philippines, was launched for the first time in India on Monday that allowed seamless and real-time fund transfer from one person's bank account to another.

Launching the Interbank Mobile Payment Service (IMPS), which has now seven banks, including State Bank of India on board, Reserve Bank of India Deputy Governor Shyamala Gopinath said it had the potential to change the retail payment landscape that boasted 600 million mobile subscribers and 300 million bank accounts.

National Payments Corporation of India (NPCI), which has been promoted by ten banks, will act as the settlement agency between banks and deliver the back-end support for the system to be operational.

“This is the first-of-a-kind system in the country and the real power will be when it starts delivering in the rural areas,” NPCI Managing Director Chief Executive A. P. Hota, told reporters here.

A bank account holder will have to get his Mobile Money ID (MMID) from the bank which will be his ID for mobile-commerce transactions.

The bank installs a special application on his mobile phone from where the remitting will be done. Once the process is complete, the bank account holder can remit money to anyone, provided he has the receiver's MMID and mobile phone number. In case of a lower-end phone where the application cannot be installed money can be transferred through SMS.

To start with, the entire service comes free for the account holder with banks bearing the cost of 25 paise a transaction.

In case the SMS-based remittance is being done, the user is charged a fee of Rs.2 an SMS which NPCI is trying to get waived-off by talking to mobile phone operators, according to a senior NPCI official.

RBI regulations cap the maximum amount to be remitted at Rs.50,000 a day.

Speaking at the launch, Ms. Gopinath said the launch of such a service would help in financial inclusion because of the success of mobile telephony in the country.

She said stakeholders in the scheme — banks, merchants and mobile phone companies — should work together for greater integration which will help address the twin challenge of reducing the use of cash and encouraging the use of mobile wallets.

The RBI is encouraging the bank-led model for m-commerce which allows for the offering of the complete gamut of banking services such as deposits, withdrawals and remittances rather than the less secure non-bank-led model, Ms. Gopinath said.

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