By Elton Gomes
The launch of Mukesh Ambani-led Reliance Industries’ payments banking services just got one step closer.
Formed in April 2018 as a 70:30 joint venture between RIL (Reliance Industries Ltd) and State Bank of India (SBI), Jio Payments Bank is among eight entities that have received licenses to operate payments banks in India.
After its launch, Jio Payments Bank will be the fifth active payments bank after Airtel, Paytm, India Post, and Fino Payments Bank.
Once commercially launched, Jio Payments Bank proposes to leverage SBI and Reliance Industries’ extensive customer base to consolidate its presence in the payments bank sector.
Reliance begins live beta trials
According to recent reports, RIL has begun live beta trials for Jio Payments Bank among its employees. Reliance will be testing its network and infrastructure prior to the planned commercial launch of services across the country. The trials will help in finding any shortcomings and their solutions.
“We have begun live beta trials for Jio Payments Bank. We are also rolling out merchant solutions and the service is seeing good acceptance across offline and online,” Anshuman Thakur, Reliance Jio’s strategy and planning chief, said on the sidelines of a press conference, Live Mint reported.
Payments banks in India
The primary objective of a payments bank is to enable financial inclusion. Payments banks are expected to do this by providing services such as small savings accounts, payments, and remittance services to migrant labour workforce, low-income households, small businesses, other unorganised sector entities, and other users.
Telecom major Bharti Airtel Ltd became the first to launch a payments bank in India in November 2016. Paytm Payments Bank launched operations in May 2017, and Fino Payments Bank started a month later in June.
Payments banks differ from normal banks in some ways. A payments bank is not permitted to give any form of a loan, neither can it issue credit cards. In terms of opening savings accounts in payments banks, customers can open a savings account with deposits of only up to Rs 1 lakh, which is also the maximum balance allowed.
Though payments banks were slated to be the next big thing in Indian banking, their future seems bleak. Reasons for their restricted impact could be attributed to a recent ban on accepting new customers and the imposition of penalties over sluggish deposit collection.
Experts say that, along with profitability pressures, stringent know-your-customer (KYC) norms and a competitive banking ecosystem could have contributed to substandard growth.
Jio to take on other payments banks in India
RIL has undoubtedly been one of the most aggressive business groups in terms of betting on emerging businesses. After grabbing a lion’s share of the market with its cheap 4G network, Reliance expanded its footprint to acquire music streaming platform Saavn and also invested in ALTBalaji to consolidate its presence in India.
The debut of Jio Payments Bank is sure to make things difficult for players like Airtel and Paytm. Jio could enjoy considerable success, especially since Airtel faced a temporary ban for alleged abuse of regulations, while Paytm has not been able to rake in the profits.
Elton Gomes is a staff writer at Qrius
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