And the heavyweights make their presence known.
India’s largest private sector company, Reliance Industries Limited (RIL) has submitted a joint application with the country’s largest bank, State Bank of India (SBI), for a license to set up a Payments Bank. RIL will be the promoter and SBI will be the joint venture partner with an equity investment of up to 30%.
The proposed 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, RIL said in a press statement. Today is the final day for submitting an application for a payments bank.
The Reach that SBI brings
It’s worth noting that SBI has a formidable, if not the best, reach for financial inclusion. According to its Q2 analyst’s presentation (PDF), SBI has the largest ATM network in the country with 53871 machines. It also has over 16,000 branches in the country. SBI also has the largest banking correspondent channels in the country and has covered 75,166 unbanked villages in the country and clocking in over Rs 17,000 crore through BC channel transactions.
RIL, which has a pan-India 4G telecom licence, is planning a very ambitious rollout for broadband and internet services in the country. The company plans to cover all states in the country covering 5,000 towns and cities accounting for over 90% of urban India and over 215,000 villages in India.
Telecom and Banking: it’s been tried before
Earlier last week, India’s largest telecom operator Airtel announced that it is applying for a payments bank licence along with Kotak Mahindra Bank as its strategic partner. However, it is interesting to note that in Airtel’s application that Kotak Mahindra Bank will invest 19.90% in the company only after it is granted a licence.
Note that earlier in 2011, Airtel and SBI had come together to form a joint venture for financial inclusion but the partnership fell through after the Reserve Bank of India expressed its apprehension and said it was felt allowing a telecom player a JV with a bank may lead to the back-door entry of a non-banking entity in banking.
Current RBI Governor Raghuram Rajan reiterated this in a speech last February and said that the banking regulator has made a consciously adopted a bank led mode for financial inclusion despite the potential for mobile banking as a delivery channel.
Other players who have confirmed an application for payments bank include digital payments companies such as Paytm, MobiKwik and FINO PayTech.