In a big U-turn, Cholamandalam Investment and Finance Company Ltd (Chola), the financial services arm of the Chennai-based Rs 26,900-crore Murugappa group, has decided to withdraw from setting up a payments bank, for which the company has got banking regulator’s approval.

The board of directors of the company in a meeting decided not to pursue the payments bank opportunity.

The company in regulatory filing to stock exchanges said: “It was decided (in the board meeting) that the company will not pursue the payments bank opportunity and hence would surrender the in-principle approval accorded by the Reserve Bank of India (RBI) to its wholly owned subsidiary Cholamandalam Distribution Services Limited (CDSL) to establish a payments bank in the private sector. Consequently, the company will not proceed with the investment / capital infusion of Rs 75 crore into CDSL.”

Chola was one of the 11 firms which got in-principal approval from the banking regulator to set up payment banks in the country.

Despite repeated attempts, Chola’s management declined to comment on the development.

Chola did not cite any reason for the pulling out of the payments bank plan.  The company informed the stock exchanges that it will be approaching the RBI with the board’s decision.

“Further to this, the board of directors of CDSL approved resolutions authorising surrender of the in-principle approval accorded to it by RBI for conversion into a payments bank. The company is intimating RBI of its decision in this regard,” said the company.

When RBI gave them go-ahead for payments bank, Vellayan Subbiah, MD of Chola, had commented in August last year that their focus will predominantly be on financial inclusion and on the MSME sector.

Chola currently has over 534 branches spread across the country and a captive base of over 7.5 lakh  customers, which is an immediate opportunity that can be tapped into, he had said.

The larger Murugappa group eco-system offers an even larger base of rural customers and this is a definite plus for us. We will take a solution to the market which will use both technology and our physical footprint. This will help in digitizing cash transactions and providing additional services to existing and new customers of the payment bank”, he had said then.

Later, in September last year, in an interview to FE , Subbiah said : “I think it is very exciting, it is the  first time these sort of banks are being done anywhere in the world. In the age where there are so much of technology disruptions are coming about, it is good that the RBI is actually encouraging use of those disruptions to actually increase the levels of financial inclusion.”