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Jio Payments Bank commences operations, 70-30 joint venture with SBI

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Jio Payments Bank has started its operations, the RBI announced in a release, making it the sixth payments bank to roll out after the central bank gave its in-principle approval to 11 applicants in August 2015. Jio Payments Bank Ltd is a 70-30 joint venture between Ambani’s Reliance Industries Ltd. and India’s largest lender State Bank of India.

Jio’s payments bank launch comes at a time when two important regulatory decisions by the RBI are impacting payments companies. First, the RBI’s directive on KYC norms for mobile wallets has let to a steep decline in their usage. Second, the central bank issued norms for telecom operators who also run payments banks (Jio falls in this category) which requires the use of third parties for KYC verification. This is expected to increase operational costs for the players like Jio.

Other payments banks that are currently in operation include Airtel Payments Bank Ltd, India Post Payments Bank Ltd, Paytm Payments Bank Ltd, Aditya Birla Idea Payments Bank Ltd and Fino Payments Bank Ltd. The other applicants like Vodafone m-Pesa Ltd and National Securities Depository Ltd have licenses but are yet to start operations. India Post Payments Bank has only seen a limited rollout, a full-fledged launch is expected by the end of this month, although deadlines have been missed before. As per RBI norms, a payments bank can accept deposits up to Rs 1 lakh, issue debit cards but are not allowed to offer loans.

What happens to Jio Money?

What remains unclear is how the launch of the payments bank will affect Jio Money, the company’s own mobile wallet. If one were to speculate, the telecom major would look to encourage migration of its customers from the wallet on to its payments bank platform. The company could choose to keep both the wallet and payments bank operational like Paytm does. But Paytm decision was driven by the fact that it was the largest player in the wallet space, Jio Money’s wallet usage numbers aren’t public which probably isn’t an encouraging sign. The other option could be to follow what Idea did as it chose to amalgamate its Idea Money wallet with its payments banks.

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