The largest private sector conglomerate in the nation, Reliance Industries, has the war chest, management bandwidth, ability to draw the top personnel from the market, management bandwidth, and Group synergies, but it won't be simple for them in the competitive banking and financial services industry.

The newest BFSI newcomer, which has already gained the reputation of disrupting the market, was described in this way by industry veterans who did not want to be identified.

By receiving the shareholders' permission for the demerger of the company's financial services division, Reliance Strategic Ventures, Reliance Industries Ltd. took the first step towards establishing a distinct corporation for financial services on Thursday. The new name of this business is Jio Financial Services.

K V Kamath serves as the company's non-executive chairman to help in the formulation of the long-term strategy. The company is targeting the consumer and merchant lending space.

The financial services industry has many different regulators that cover lending, advisory, insurance (both general and life), mutual funds, payments, distribution, and private equity, among other areas of the business. Banks and non-banking financing firms (NBFCs) are the two main players in the financial sector, particularly in the lending market where Jio will be active.

An authorised business is banking. The Reserve Bank of India (RBI) granted the last two full scale banking licences to the Kolkata-based microfinance organisation Bandhan and the developmentally focused financial institution IDFC about ten years ago. Before that, in the middle of the 2000s, Kotak and Yes Bank received licences. Jio Financial is still a long way from making a banking move. Although Reliance Group does in fact hold a payments banking licence, any lending activity is restricted by this differentiated banking licence. Furthermore, banking is a diversified and competitive industry that offers corporate loans, MSME, agri, and retail loans, even if the RBI grants industrial houses banking permission and Jio receives a banking licence, say 3-5 years from now.

Jio Financial will initially be a play for an NBFC. The industrial houses from Tatas, Aditya Birla, and even Reliance (unified), subsequently run by Anil Ambani, have all had a presence in the NBFC market in the past. However, there hasn't been much of a disruption from the corporate houses so far. One possible example is Bajaj Finance, which not only succeeded in financing consumer durables but also opened up a new market for banks and NBFCs.

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