Mumbai: Jio Payments Bank, a 70:30 joint venture between Mukesh Ambani-owned Reliance Industries Ltd (RIL) and State Bank of India (SBI), will begin operations in December, three people aware of the plans said.

“The payments bank was expected to launch its operations in October. The launch got delayed as the RBI had asked them (Jio Payments Bank) to demonstrate its capabilities to ensure it is ready for a glitch-free launch. The launch will now be in December," said the first of the three persons cited above on condition of anonymity.

The payments bank had initially planned its launch to coincide with the delivery of its 4G-enabled Jio Phone in October. The delivery of Jio Phones has already started.

“The RBI wanted to be sure that the payments bank is fully compliant with all the regulations and is able to service its customers efficiently. The demonstrations are being made to assure the regulator that the standards of customer service will be sustainably maintained," a Jio official said on condition of anonymity. Spokespersons of SBI and RIL did not respond to e-mails seeking details.

SBI will be leveraging Reliance Jio’s network to reach the last-mile customers.

“For SBI, Jio Payments Bank will operate as a business correspondent. SBI will have immediate access to Jio customers in unbanked rural areas," the first person said. So far, over six million Jio Phones have been booked, allowing users to link the device for UPI-based payments and other banking transactions.

A Press Trust of India report dated 22 September stated that deliveries of the low-cost 4G handsets will begin in rural areas and small towns, before urban centres.

“The chairman (Mukesh Ambani) had said that the Reliance Jio Phone will bridge the digital divide between rural and urban India. Therefore, delivery of Jio Phone will start this Sunday (24 September) in rural areas and small towns," the PTI report said, quoting an unnamed channel partner of Reliance Jio Infocomm Ltd.

In turn, Reliance Jio will also be able to expand its customer base through SBI.

The third person mentioned above said that banking is not the main focus of Reliance Jio.

“Launching a payments bank will also help Jio in reaching out to new customers," he said.

SBI had a customer base of 420 million as of 1 April. Having started its operations in September last year, Reliance Jio had about 129 million customers as of 31 August, according to a report by Cellular Operators Association of India (COAI).

The firm received in-principle approval from RBI to launch a payments bank in August 2015.

Even as non-cash retail payments growth has decelerated from the highs it touched during the demonetization phase, the volume of digital transactions continues to show an upward trend.

“Non-cash payments are rising faster in volume than value terms, implying that the shift to digitisation is happening largely in the lower ticket transactions," Ashutosh Datar, vice-president at IIFL Institutional Equities Ltd said. As per RBI guidelines released in October 2016, the central bank allows payments banks to engage with group entities at an arm’s length to operate as business correspondents.

Employees of the group entity can also conduct banking activities, provided the payments bank remains responsible for the services offered.

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