With the ubiquity of smartphones everywhere, the need for increasing the scope of mobile banking to promote financial inclusion was needed. Prior to payments, the government experimented with the “Pradhan MantriJan dhan yojana’
to promote banking habits among people at the bottom of the economic pyramid. But most accounts in Jan Dhan Yojanaremain dormant and misuse increased after demonetization was announced. Lack of education, no time to travel to bank branches coupled with low literacy levels contributed to the failure of this scheme. But this failure proved to be a stepping stone to success.
- The government responded by promoting mobile based banking through apps by permitting e-kyc to ride on the telecom bandwagon.
- For the past two decades, telecom companies were busy laying the fibre-optic network and offering last mile connectivity to users in far flung areas of the country. The government used this pre-existent infrastructure to roll out mobile banking through a payment bank infrastructure.
- Along with demonetization, it was a badly needed step as the government was already spending 3000crores per year in currency printing. High denomination notes were introduced to reduce the load on the currency printing ecosystem. But it created more problems than it solved.
Payment banks are being viewed as the next best thing to happen to the Indian consumer. Jio payment bank launch date
November 2016, just two days after demonetization of the economy was ushered.It made sense to launch at that time to make the public aware of the benefits of a less cash economy. And more electronic transactions reduce the chances of corruption at every level.
JIO-A joint venture between RIL and SBI
Set Up as a joint venture between SBI and RIL, Jio Payments Bank
is sure to turn out into a successful financial conglomerate owing to the sheer size and scale of operations it brings to the table. Leveraging the deep pockets of Reliance and the vast extensive network of SBI built over 150 years, it is sure to make financial inclusion a reality for every India.This is in line with the policy of reliance to usher in transformative solutions rather than seeking growth in just numbers.
Post its launch, it will turn out to be the fifth largest payment bank after Airtel, Paytm, India Post, and Fino Payments Bank. Being a 70:30 joint venture between RIL and SBI, the combinedentity will tap a user base of more than 550 million. It is sure to emerge as an exciting platform for first time banking customers.
With the entry of reliance in the financial services space, the game is al set to change for Reliance investors and stockholders. By launching their own JIO payment bank which went live in December 2017. The same was communicated by the RBI to the nation through a press briefing.
In 2015, the reserve bank of India had granted licenses to 11 entities for opening payment banks to expand the ambit of banking services in the country. Following were the license winners
|Aditya Birla Nuvo Limited
|Airtel M Commerce Services Limited
|Cholamandalam Distribution Services Limited
|Department of Posts
|National Securities Depository Limited
|Reliance Industries Limited
|Shri DilipShantilal Shanghvi
|Shri Vijay Shekhar Sharma
|Tech Mahindra Limited
|Vodafone m-Pesa Limited
The following entities have already started payment bank operations
|Airtel Payments Bank
|Fino Payments Bank
|Aditya Birla Idea Payments Bank
|India Post Payments Bank
|Paytm Payments Bank
One of the key license winners was reliance industries. And it went about creating a payment bank infrastructure by partnering with SBI. JIO PAYMENT BANK was set up as a 70:30 joint venture between Reliance and SBI. in this combined entity, SBI will offer backend support to banking operations.
Step by step guide to opening the jio payment bank account
Opening an account with JIO payment bank is easy with but few know the right procedure. Rest others do not have the time or lack the documentation. Here’s how you go for it.
You need to have a 4G phone to have full access to all JIO products and services. Install the JIO Payment bank app from the play store and sign in securely with your JIO number.
Enter your Aadhar number to complete the critical KYC process.All inputs must be filled to successfully link your Aadhar card. If you have wrongly entered your Aadhar card number, the system will detect it and ask you to do so again.
Should you desire a physical debit card, then it is available for a nominal fee and for that you need to update your address so that the ATM card and debit card can be couriered to you.
Post the completion of e-KYC features, a physical verification will be conducted to get your wet signatures and thumb impression.
Alternatively, you canvisit the jio payment bank website
and make verification by visiting the JIO payment bank Authorization centre.
Jio payment bank account details with interest rates
You need to know in advance as to what you can expect from a jio payment bank account. It needs to be understood that these are just payment bank accounts and you cannot avail any kind of loans or overdraft facility. Though you can expect higher interest rate from jio payment bank ltd
as competition between these new-found entities being floated by Airtel, Paytm is high. Everyone is competing for a share of the customer’s wallet. Here we have listed out some of the salient features of the jio payment bank account
whose interest rates
are expected to be in higher range to attract customers.
:Users can deposit up to one lakh rupees in this account. deposits beyond this point are not allowed by RBI at this moment.
Debit card facility to shop and spend both in India and abroad is being offered to depositors.
Cross-selling of financial products like mutual funds and insurance is allowed to enhance greater participation from the masses.
Jio payment bank interest rate
will be higher in the beginning as the company plans to mobilize more deposits from the public to promote financial inclusion and increase the banking habits of people. Higher deposit limits may be introduced in the future. But care will be taken so that traditional banking businesses do not suffer.
Businesses Too Get Distinct Benefits through payment banks
- Jio payment bank offers significant benefits to small businesses too. Merchants with low employee count of under ten employees can open a salary account by leveraging the facilities offered by a jio payment bank account.
- Traditional banks do not offer salary account facilities for businesses with less than ten employees. But jio payment bank account app does offer this facility. And it is a great move towards a less cash economy and promote cashless transactions right at the salary disbursal stage itself.
- Small businesses will appreciate this step from the government as they do not have to bother about writing checks and waiting for three months till the employee encashed them. No cash transaction will take place on the salary day as everyone will be paid through the mobile route.
Factors helping the growth of payment banks
- New businesses in the banking sector need huge influx of cash to compete aggressively in the market. Higher interest rate prompts users to invest huge amounts of money in these entities.
- On an average, it has been observed that users spend 30% of their salary on shopping for groceries rest is either spent through cheque or stashed aside in automating sweep fixed deposit accounts.Payment banks can use this 30% by allowing shopping through debit cards on their platform.
Prevention against money laundering
- More cash being diverted through the electronic route means less cash in hand for international hawala operators who transfer money faster than any other transfer mechanism using a code-based system. They leverage their network of hawala operators across the globe to transfer the moneyacross countries with just one phone call.
- With payment banks coming on the scene that allow electronic transfer of funds internationally, this loophole will get plugged. And unnecessary drain on the country’s economic resources will stop. In fact, foreign investors are expected to invest more given the high prospects of a well -developed money market that they see here.
Prevention against financing of terrorist activities
- Post-demonetization,all terror activities in the country both in Kashmir and North-east came to a standstill as anti-national forces had no cash in new currency to give to locals to foment trouble. Local politicians often received money in gas cylinders to create unrest in the valley, but demonetization broke their back and pulled the ground from under their feet.
- With payment banks getting popular, less money will be available in the hands of extremists to foment trouble. Some extremist organizations typically begin selling stocks before a planned bomb-blast and exit the market before the attack is planned. This way, they make a lot of money, but new buyers are left with junk stocks having scap value. This kind of insider trading comes to a stop as no funds are available for revolving in stock markets.
Mutual funds and insurance
Apart from shopping, rest of the investment made by users in insurance and mutual funds are also on the radar of payment banks. Let us look at their strategy for the future.
It is a long-term investment to safeguard your future and your family’s future. But anecdotal evidence shows that people on the top of the income pyramid often invest their cash surplus over a period of seven to nine years to reap exponentially high returns for the future.
- Most of middle-class India is under insured and the average revenue per user is low as compared to the developed markets of the west. Owing to its slow liquidity, middle class India prefers to invest in debt products or in equity products like unit linked insurance plans.
- By casting the insurance net wider, through payment banks, not only does the government create a wider social security net but also increases the money flowing through the insurance sector. Higher benefits can be offered by jio payment bank account through interest rates that will be higher than what is being offered internationally.
- Awareness is a huge problem and few people know in detail about the breadth of policies being offered.
Pooling together the investments made by public and deploying them intelligently in stock market products, government securities, infrastructure bonds to fetch higher rates for investors is what mutual funds do.
With payment banks on the scene, the game is sure to change and more investments from the masses will go into mutual funds. Users will get higher rates through both saving accounts and investments made in mutual funds every month through the electronic route by using the payment bank platform.Banking habits of people will change leading to a high savings formation ratio. More money will be available for companies to invest in capacity expansion and job creation.
Allin all, payments banks are a blessing in disguise for the Indian BFSI sector.
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