Reserve Bank of India governor D Subbarao yesterday asked banks to lower their intra-bank fund transfer charges, saying that must pass on the cost benefits of greater use of technology to customers.

''I was surprised to note that transfer of funds from one branch of a bank to another, both under the core banking system (CBS), entails a service charge for the remitting customer. The entire institution of banking is built on consumer trust. By imposing charges not commensurate with the cost of services provided, we risk losing this fundamental trust that underlies a banking relationship,'' he cautioned.

The RBI governor was in Hyderabad to confer the Banking Technology Excellence Awards 2009, instituted by the Institute for Development and Research in Banking Technology (IDRBT).

In his keynote address, Subbarao urged financial sector leaders to take advantage of new technologies, saying they would reduce costs of financial transactions, improve allocation of financial resources and increase competitiveness and efficiency of financial institutions.

He particularly stressed the need for banks to take advantage of the expanded reach of telecommunications. He said mobile phone users belong to all strata of society and the phone's integrated chip could function as a multi-application smart card. ''This holds substantial promise as the delivery vehicle of the future.''

He asked banks to reach out to all mobile phone users, including the poor, riding on the explosion in the use of mobile communication technology. More than a third of India's population uses mobile phones and twice the number has access to it, according to industry estimates.

Subbarao said information technology could help in improving the asset liability management for banks, which has a direct bearing on their profitability. 

 ''The success of IT implementation is ultimately manifested at the counter of the bank ATM, and not the data centre. If the customer is turned back on the last day of tax payment or the cheque gets returned because the CBS cannot be accessed at a branch, the entire edifice of efficiency collapses in the eyes of the common man,'' Subbarao said.

Stating that IDRBT's role had extended beyond research over the years, he said a committee headed by C Rangarajan was looking into redefining the institute's role, and its recommendations were anticipated soon.