State Bank of India (SBI) is likely to reconsider its participation in the jio Payments Bank joint venture with Reliance Industries Ltd if the payments bank fails to develop a business plan for full-fledged operations, according to an official familiar with the situation.
The payments bank’s formal launch has been delayed by more than four years due to indecision in developing a business model. The bank was established in April 2018 as a joint venture between SBI and Reliance Industries, and their five-year agreement expires early next year.
“Reliance is a critical business partner.” They have stated that they will develop a strategy by September. Following that, we’ll have a discussion. If that happens, we would like it to be a mutually agreed-upon decision,” the official stated above., an SBI banker, on condition of anonymity.
SBI and Reliance Industries’ collaboration was expected to dwarf other payment companies. For its payment bank, RIL was expected to leverage Jio’s pan-Indian telecom network and Reliance Retail’s online and offline reach. SBI, on the other hand, was expected to provide product structuring expertise as well as a mass distribution network to help the payment bank gain more business.
In its notes to accounts accompanying the March quarter result, SBI said it infused 9.48 crore in the payment bank. The country’s largest lender owns 30% of Jio Payments Bank, with the remainder owned by Reliance. The latest capital injection, according to the previously quoted person, is part of the original agreement.
Jio Payments Bank stated in a report accompanying the FY21 results that it has opened current accounts in collaboration with Reliance Retail as part of the JioMart programme for introducing traders. The bank provides services such as instant account opening, real-time settlements, and payments for point-of-sale transactions.
“The payment bank was designed to integrate with the Jio ecosystem.” That’s why their locations were near Jio stores. However, the bank has not integrated well. So we asked them to create a model,” the person explained.
Emails sent to SBI and Jio Payments Bank were not returned.
Jio Payments Bank reported a loss of 89.7 million on an income of SEK 13.39 million in FY21. It made a profit of 50.36 lakh on an income of SEK 19.39 million last year.
During FY21, Jio Payments Bank was fined 1 crore by the Central Bank of India for failing to renew the appointment of its CEO and CEO on time.
After five years of operation, the RBI has allowed payment banks to convert to small financial banks (SFB).
Existing banks have already applied for a small financial banking licence, including Paytm Payments Bank and Fino Payments Bank. However, Airtel Payments Bank and Jio Payments Bank will be unable to apply for an SFB licence because RBI regulations prohibit large corporations from owning commercial banks.
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