Tech Mahindra drops payments bank plan

Cites margin concerns as reason

Tech Mahindra drops payments bank plan
Mahindra and Mahindra profit in Q4 rises to Rs 583.7 cr launched its KUV 100 (a compact SUV) with its first petrol engine, during the quarter.

Mahindras on Tuesday became the third entity to drop out of the payments bank race, saying business profitability would take longer time due to “aggressive posturing” by many deep-pocketed players.

Tech Mahindra is the third applicant to abandon the plan to set up payments bank after Cholamandalam, which quit last month, and Dilip Shanghvi-IDFC Bank-Telenor combine that opted out last Friday.

“Over a period of time, we have realised that the amount of aggression that has come into the marketplace only erodes the margins,” Tech Mahindra managing director and chief executive CP Gurnani told reporters, after its board decided not to pursue the opportunity.

After the Reserve Bank had given in-principle approval for payments banks to TechM and 10 others last August, it had said group company Mahindra Finance would be an equal partner in it.

Gurnani said profit margins were always supposed to be “razor thin” in the payments bank business, but the aggressive posturing by competition which has the who’s who of the telecom world, including the Ambanis, the Birlas, Airtel and Vodafone, among others, only made it realise that “business profitability will take a much longer period”.

When asked if RBI conditions are onerous, its chief strategy officer Jagdish Mitra said the regulator cannot be blamed for pursuing the broader goal of financial inclusion.

But he was quick to add that “it has to make business sense because at the end of the day if it doesn’t make business sense then the objective of financial inclusion is not met.”

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First published on: 25-05-2016 at 07:46 IST