With an aim to become a leader in the banking industry, Reliance Industries along with the State Bank of India (SBI) has applied for a payments bank license.
This step will get the nation's largest banking network and pan-India telecom and retail venture closer.
Apart from being the largest lender of the country, SBI is also a commercial bank. Hence it cannot apply for the payments bank license alone. This joint venture with Mukesh Ambani-led Reliance Industries will enable it to acquire one. The two companies has submitted a joint application stating that they wish to establish a payments bankto the Reserve Bank of India (RBI) yesterday.
Reliance will play the role of promoter and own 70% stake in the venture while SBI will own 30%. The bank will be providing services like remittances and deposits but will not be issuing loans. Reliance has no plans to set up a full-fledged bank.
A statement by Reliance informed that the partnership is formed following all the guidelines that RBI has issued regarding payments banks. It further stated, "This partnership brings together the combined strengths of two of India's Fortune500 corporations committed to making a transformative impact on India's financial inclusion landscape."
Reach of the two partners
Reliance Industries has acquired a 4G telecom license. With this, the company will offer broadband and telephony services all over the country. It has planned to extend its services in every state of India, including 5,000 towns and cities and 2,15,000 villages. It will be covering more than 90% population of urban India. Reliance's retail business is also widespread. It has 2,300 stores in 166 cities. These stores see around 10 lakh customers daily.
SBI has set up 15,869 branches and 43,515 ATMs in the country. Besides, it has tie-ups with 45,487 business correspondents.
Benefits of the proposed payments bank
The payments bank will be able to leverage the countrywide distribution network of SBI. It will also leverage the risk management techniques and the considerable investments made by Reliance Industries in its retail and telecom activities.The bank will utilize state-of-the-art technology. Besides, cutting-edge infrastructure with all necessary amenities, a consumer-friendly experience, widespread branches and a large business network will be built to assist customers. The bank will help the two partners to strengthen their customer and agent base. It will also help them to enhance their skills and knowledge.
Functioning of the proposed bank
The bank will function independently and will not be managed by the two partners. A new Board will be formed which will then appoint experts to its team. The Board will be responsible to ensure that the bank is operating in accordance with the rules and regulations specified by RBI. The bank will be able to use the experience of and seek advice from Reliance and SBI, when required.