State Bank of India’s proposed joint venture with Bharti Airtel has fallen through after the Reserve Bank of India expressed apprehensions over letting a telecom player into the banking space through equity participation.
The proposed JV in which SBI would have 51 per cent stake and Bharti 49 per cent was announced in January, with an objective of extending banking services in rural areas through the business correspondent model. The incorporation of the joint venture was scheduled by March 2011.
Sources in SBI said the RBI was not in favour of a non-banking company’s equity participation in the proposed deal. It said it was felt allowing a telecom player a JV with a bank may lead to the back-door entry of a non-banking entity in banking.
The proposed venture envisaged to use Airtel’s retailers as customer service points (CSPs) all over the country. All the existing and new Airtel mobile customers would have been able to visit these outlets and open new SBI bank accounts and avail themselves of other banking products and services available at CSPs. Additionally, existing SBI customers would also benefit from the services at these outlets.
According to an SBI official, the Rs 100 crore JV would have given the bank the comfort of exclusivity with the partner. Bharti Airtel obtained the necessary approval from the telecom regulator, said a senior company official, adding the responsibility of obtaining the banking regulator’s approval was SBI’s. An email sent to Airtel’s spokesperson for a comment on the development remained unanswered. While the JV is off, SBI will rope in Airtel as one of its agents under the business correspondent model.
The joint venture was proposed by former SBI chairman O P Bhatt. After Bhatt retired in March this year, the new management was not keen to pursue any project not finding favour with the RBI, sources said.
This is the second JV the new management has shelved in the past nine months in the light of the RBI’s discomfort. A JV proposal with Tata Motor Finance was shelved earlier.