Entry of Jio Financial Services will disrupt the banking sector as it did with telecom sector

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Jio Financial Services: Mukesh Ambani-led Reliance Industries’ (RIL) decided to demerge its financial services business into Reliance Strategic Investments (RSIL) and rebrand it as Jio Financial Services (JFSL) is likely to shake up the financial sector significantly. The company has submitted requisite applications with Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (Irdai) for approvals in connection with the de-merger scheme.

Jio Financial Services (JFSL) has appointed banking sector veteran KV Kamath to be the non-executive chairman of the company, while McLaren Strategic Venture’s top executive Hitesh Sethi will reportedly be the new CEO.

KV Kamath

Kundapur Vaman Kamath is the former chief of the New Development Bank of BRICS countries, previously he has also served as the Chairman of Infosys Limited, the second-largest Indian IT services company, and as the Non-Executive Chairman of ICICI Bank, India’s largest private bank. Kamath has been the main person behind ICICI Group’s growth and development, partly also because many sectors opened up during his tenure, like asset management and insurance sectors.

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JFSL Vision

JFSL’s vision seems to become a complete financial services conglomerate. It seems to have already started identifying people from various companies for various positions. Getting a bank licence is very difficult as they are a corporation, but they can be a large NBFC, enter insurance business or mutual funds.

JFSL – the night mare of NBFCs

Reliance group has a huge customer base of 20 million users, as well as vendor partnerships, JFSL would first enter into consumer lending, especially electronics, and merchant financing. One of the good characteristics of financial services is the promoter’s ability to put in capital during volatile times. In JFSL’s case, it will be backed by India’s most valued company, Reliance Industries.

Jio could disrupt businesses of NBFCs, fintechs the most and banks the least. Among NBFCs – Bajaj Finance and Poonawala Fincorp could get highly impacted by Jio.

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How Jio can overthrow its competitors?

Jio Financial will have a large distribution network and customer ecosystem derived from the other businesses of Reliance, i.e. retail, telecom and finance website. It has access to huge data collected from these three areas. It could try and exploit these like Alibaba, Google and Facebook did. Jio already has a huge database of customers and it will use these details to overthrow its competitors.

RIL financial services

RIL’s financial services business presently comprises its investment arm Reliance Industrial Investments and Holdings (RIIHL), Reliance Retail Finance, Reliance Payment Solutions, Reliance Retail Insurance Broking, Reliance Strategic Investments, Jio Information Aggregator Services and Jio Payments Bank. RIL’s financial services business, along with that of Reliance Strategic Investments, posted a combined revenue of Rs 1,535.6 crore in FY22, with an asset base of Rs 27,964 crore.

Wide Scope of JFSL

JFSL will have a wide presence in many areas of finance and their scope of activities will be fairly wide. It (JFSL) will carry on the business of Investment/finance. The Company will provide financial services, advice and facilities such as those provided by bankers, stockbrokers, stockjobbers, foreign exchange dealers, commodity brokers, investment and pension fund managers investment/merchant bankers, insurance brokers, hire-purchase, leasing, regardless of whether the property purchased and leased is new and/or used and from India or from any part of the world.

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