Reliance Industries and 10 others to open Payments Banks

11 entities have received an approval from the Reserve Bank of India (RBI), yesterday to initiate payments banks. These payments banks will expand the reach and benefits of banking services. It will also help the government to achieve its aim of financial inclusion.

Organizations chosen

RBI chose large companies and telecom operators for this venture. It said that organizations which have experience are picked from varied fields. These organizations have different capabilities that may result in different models.The approval from RBI will be valid for one and a half year. If the organizations abide by RBI rules, they may receive formal licenses after this period.

41 organizations had applied for payments banks. Out of these 11 were chosen. These include Reliance Industries Ltd., Airtel M Commerce Services Ltd. (subsidiary of Bharti Airtel), Department of Posts,Tech Mahindra Ltd., Aditya Birla Nuvo Ltd.,Cholamandalam Distribution Services Ltd.,FINO PayTech Ltd., National Securities Depository Ltd. (NSDL), and Vodafone m-pesa Ltd.(a part of Vodafone India). The list also consists of 2 individuals – DilipShanghvi and Vijay Sharma. Shanghvi is the Founder of Sun Pharmaceutical Industries Ltd. and Sharma is the CEO of One97 Communications.

Partnership between Reliance Industries and SBI

Reliance Industries is partnering with State Bank of India (SBI) to form the payments bank. SBI has asked for 30% stakes in the partnership. Chairperson of SBI, Arundhati Bhattacharya expressed that the strengths of two India’s Fortune 500 companies will be combined through this partnership. The companies are “committed to making a transformative impact on India’s financial inclusion landscape.” She further said that the license is an opportunity for them to encourage financial inclusion and offer banking services to under- banked, unbanked and small businesses.

Facilities from the bank

These banks will offer services like payment, deposit, savings and remittance. A customer may deposit a maximum amount of Rs. 1 lakh. The banks are specially designed for people that do not have access to the usual banking system. The main target of these banks will be low-income households, small businesses and migrant workers. These banks will not be offering lending facilities. Hence, they will also be away from the risks that other banks face.

The banks will operate with point-of-sales devices and through business correspondents. They have the potential to revolutionize retail banking in the payments space. They will boost the number of cashless transactions. Besides, the banks will also be instrumental in encouraging the habit of savings.

Union Finance Minister, ArunJaitley expressed that payments banks licenses given by RBI is a vital step. These banks will reach to people in rural areas, too.

Other government initiatives

The present National Democratic Alliance (NDA) government has made financial inclusion, its priority. It launched the Pradhan Mantri Jan-DhanYojana (PMJDY) so that every house in the country has a bank account. The scheme offers easy money transfer, life insurance cover of Rs. 30,000 and an accidental insurance cover of Rs. 1 lakh. The PMJDY website mentions that 175.7 million bank accounts have been initiated under this scheme as of August 12, 2015.

Summary

11 organizations including Reliance got an approval from RBI to open payments banks.

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