The much-hyped Reliance-SBI payments bank, which was widely expected to have begun operations in December 2017, seems to have run into rough weather and its launch has apparently been delayed indefinitely. This comes as a breather for lakhs of State Bank of India employees who were worried that this would render SBI weak and vulnerable.
According to highly placed sources in the banking industry, the change of leadership in SBI and the unsavoury controversies surrounding payments banks have together slowed down the Reliance-SBI payments bank venture.
Another factor that has affected the joint venture is the lacklustre market response to the Reliance Jio feature phone.
Senior SBI officials admitted to this correspondent that after the initial hype, not much action was witnessed on this front. The Reliance Payment Bank, which was given final clearance by the Reserve Bank of India (RBI) in March 2017, was stuck in the basic exercise of formulating the operational modalities, one bank official said. “This is going to be a 70:30 joint venture partnership between Reliance Industries and SBI, which holds 30 per cent equity stake. The operational modalities are still being formalised,” said a senior New Delhi-based SBI official, who is also a senior office-bearer in the State Bank of India Officers’ Association (SBIOA).
Another official told Frontline that the fact that even basic modalities had not been finalised indicated that there was some rethink on the issue. It may be mentioned that the SBIOA has been opposing the proposed payment bank on the grounds that the stated purpose of reaching the unbanked and infusing new technology initiatives in banking services was already being achieved by SBI. The bank would end up being a loser in the overall bargain as its vast network and technical expertise would automatically become available to Reliance for starting its payments bank, he said. The SBIOA has also given representations to the RBI demanding that the licence be revoked (Frontline, December 8, 2017).
One of the main reasons being cited for the delay in launching the payments bank was the change of leadership in SBI. The outgoing SBI Chairperson, Arundathi Bhattacharya, was known to be enthusiastic about it. She had been quoted in February 2015 as saying: “This will get us business. Our plan is to cover 250,000 villages and 50,000 towns in the next three years.... Mobile and hand-held devices are able to reach customers in even remote areas.” She demitted office in October 2017, and the new Chairman, Rajnish Kumar, has been lukewarm about the whole exercise.
The lacklustre performance of the Reliance Jio phone is another reason cited for the slowdown. Industry experts said Reliance Industries had planned to launch the venture in December hoping that by then the Jio feature phone would have captured the market, which, in turn, would have provided them a good customer base to begin with. But the feature phone has tanked, and there are rumours that the company will stop its production. In its place an Android-based smartphone would be introduced. The company had stopped bookings for the Jio feature phone in August last year, citing overbooking as a reason, but the fact remains that even those who had booked the phone have not got it.
“But we had never announced the date for launching the bank. People have been speculating on our behalf,” said a senior Reliance executive, denying that there was any delay in starting the banking operations.
“The regulatory procedures in the RBI are still not complete,” he said. He, however, refused to specify what regulatory procedures were pending even after the RBI had given the final clearance.
Bad experiences These additional “regulatory procedures”, banking industry experts say, are probably a result of some of the bad experiences the RBI had with some payments banks that started operations recently. For example, Airtel Payments Bank’s eKYC licence was suspended by the Unique Identification Authority of India (UIDAI) in December for alleged pilferage of Aadhaar data. There were complaints that it had opened accounts for Airtel customers when they synced their Aadhaar numbers with their mobile numbers. Government subsides amounting to Rs.138 crore had been transferred into these accounts, which numbered 55.63 lakh. When the UIDAI found the charges to be true, it suspended the eKYC licence of Airtel Payments Bank and made it pay a penalty of Rs.2.5 crore. As a result, the chief executive officer of Airtel Payments Bank, Shashi Arora, had to resign. Earlier, Vodafone-mPesa was found to be indulging in a similar malpractice: taking the Aadhaar data of customers who had linked their mobile numbers with their Aadhaar numbers and opening accounts without their knowledge.
Employees of SBI are also celebrating the fact that the proposed Financial Resolution and Deposit Insurance Bill, 2017, which was to be introduced in the winter session of Parliament, has been deferred as the Joint Parliamentary Committee examining the provisions contained in the Bill has sought an extension until the Budget session.
The Bill caused a great deal of consternation in SBI circles as it had a provision for amalgamation, acquisition or liquidation of SBI if, in the government’s opinion, the bank’s financial health became precarious.
Whatever the final outcome of these developments in the financial sector, for now it will be business as usual for SBI, and customers of public sector banks can breathe easy.
Purnima S. Tripathi
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