Close on the heels of Airtel tying up with Kotak Mahindra Bank, Mukesh Ambani’s Reliance Industries Ltd has announced that government-controlled State Bank of India will be its partner in its payment bank venture.
The day also saw Future Group, which runs Big Bazaar, and Idea Cellular, announcing that they too have applied for payments bank licenses.
Payments bank license will allow these companies to offer a host of banking services, such as money transfer and bill payment, except deposit taking and loans.
“The partnership is in accordance with the guidelines for Payments Bank issued by RBI and subject to grant of license by RBI,” said Reliance Industries about its tie-up with the SBI, India’s biggest bank.
“This partnership brings together the combined strengths of two of India’s Fortune 500 corporations committed to making a transformative impact on India’s financial inclusion landscape,” it said.
The move is part of Reliance Industries’ diversification into consumer oriented business, and away from its focus on B2B businesses like petrochemical manufacturing, refining and so on.
It will also tie-in with Reliance’s retail operations and telecom operations.
Payments banks have not taken off in India yet due to severe restrictions imposted on standalone money transfer operations of telecom companies. In countries such as Kenya, mobile companies process more banking transactions than banks themselves.
“The Payments Bank will leverage SBI’s nationwide distribution network and risk management capabilities along with the substantial investments made by RIL in its retail and telecom businesses. It will deploy state-of-the-art technology, build scalable infrastructure and create extensive branch and business correspondent network in order to provide last-mile access and intuitive user experience to all sections of society,” RIL said.
Besides promoting financial inclusion by providing banking and transaction services to unbanked, underbanked and small businesses, the partners see formation of the Payments Bank as an opportunity to lead and co-create an eco-system to provide accessible, simple and affordable banking solutions, digitize payments and act as a catalyst towards a cashless society and to democratise banking and payment services through massive adoption and low transaction costs, they said.
The tie-up with SBI is likely to give RIL and its telecom arm, Reliance Jio Infocomm, a major leg up over competition from Airtel Money, Idea and Big Bazaar as SBI has the largest number of branches in India. SBI especially has a lot of branches in rural areas, where most of the receipients of money transfer orders reside.
It is not clear whether India Post, which used to offer services such as Money Orders, has also applied for Payments Bank license.