Bank Account Portability – Switching Banks without changing account number

 

Bank  Account Portability – Switching Banks without changing account number

Customers may soon be allowed to switch banks without changing account numbers. After similar moves in mobile telephony and health insurance in 2011, the government plans to introduce bank account number portability.

The idea is to save customers the inconvenience of opening and closing bank accounts or keeping multiple accounts if they have to shift to a new location or find their bank’s services unsatisfactory. 

The finance ministry has started discussions with the Reserve Bank of India (RBI) and banks, including private sector lenders, to assess the feasibility of introducing the move over the next few years. In a step towards this direction, all banks will be asked to follow common KYC (know-your-customer) norms. An expert committee will be formed to explore it further and prepare a report.

“We have started preliminary discussions with the RBI and banks, and they are on board. Bank account number portability will allow a migrant worker to shift his account from one bank to another simply by writing an application to his home branch,” said a finance ministry official, adding the move might take another three years or so to materialise. The banks may not need much preparation on the technology front, as already some services (like ATMs) are integrated and most banks are fully on the core banking system.

However, the biggest challenge before the government is security. A lapse on the part of a bank in following KYC norms can pose threats to national security and client confidentiality. There could be customers switching banks too frequently to escape the Prevention of Money Laundering Act. The official said all such aspects would be considered. With the deregulation of interest rates on saving deposits, customers will have the choice of switching to a bank offering higher rates without much paper work.

Bank account number portability is being introduced in different forms in countries such as Sweden, the UK, Australia, Hungary and South Africa.

Source: BS