Bank Account Number Portability: An important step towards Open Banking in India

In April 2012, RBI  had asked banks to allow intra-bank account portability in cases where full KYC (know your customer) details of the concerned account had been ascertained and a customer could operate and use the same account number across any branch of one bank.

Competition in retail banking could be set for a quantum leap, with RBI initiating  debate on possibilities  to allow customers to retain their bank account number even if they switch banks, like they would with a mobile phone number. The plan entails enabling a dissatisfied customer to simply shift his banking relationship, lock, stock and barrel, to another bank. The two key enablers for this in the Indian context are Aadhaar as the unique identification for customers and National Payments Corporation of India (NPCI) as a central payment mechanism.

Both are key to a move in the direction of bank account number portability, which would need the fulfillment of three essential pre-requisites — a shared payment system, a unique identity and a central clearance system. The shared payment system, regulated independently, would be needed where all account number and payment instructions are warehoused (such as standing instructions or direct debit), while operationalising of the central payment system would require credits and debits to be linked to the unique identification.

With technological advancements in the field of payment system such as UPI (unified payments interface) etc. coupled with massive enrollments under Aadhaar and their linkage to individual bank accounts, it (account number portability) has come within the realms of possibility. As such, the prospect of an aggrieved customer silently moving her account to another bank in the near future has become very real.

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

The International Bank Account Number (IBAN) is an international standard for identifying bank accounts across national borders. It has multiple benefits. If all banks implement IBANs, the customer will only need to state the correct IBAN and the payment will be routed to the right account. It was originally adopted by the European Committee for Banking Standards, and was later adopted as an international standard ISO 13616:2007.

Based on the findings of the survey and based on studies of different account number patterns clubbed with international practices, the following Basic Bank Account Numbering (BBAN) formats are suggested for the Indian banking scenario: The IBAN consists of country code, followed by two check digits and up to thirty alphanumeric characters for the domestic bank account number, called the BBAN (Basic Bank Account Number).

Bankers and other experts aren’t quite convinced that this could be done easily. uniformity of account number formats is a must for portability . Account portability will be bit of a challenge from banks’ point of view since they have to change file structure given their core banking solution. The mechanism will evolve but it will be expensive.

But , the Indian telecom sector has already adapted the idea of Mobile Number Portability and made it easier for customers to switch operators retaining the same mobile number driving higher competition and competitive pricing for people.