Tech Mahindra chickens out of payments bank race, cites delayed profitability and tough competition

After Cholamandalam and Dilip Shanghvi-IDFC Bank-Telenor combine, Tech Mahindra has become the third entity to have dropped out of the payments bank race.

The firm has cited that the business would take a lot of time to turn profitable because of "aggressive posturing" by deep-pocketed global competitors.

Cholamandalam had quit the race in April, while Dilip Shanghvi-IDFC Bank-Telenor combine announced their decision 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," said Tech Mahindra MD and CEO CP Gurnani.

The Reserve Bank of India had given in-principle approval for payments banks to TechM and 10 others in August 2015.

Gurnani further added that payments bank business always carried the risk of profit margins being "razor thin," but the competition they would face includes the who's who of the telecom world, including the Ambanis, the Birlas, Airtel and Vodafone, among others, thus delaying profitability for a long time.

The announcement has come just a day after RBI deputy governor S S Mundra had said that it was not fair of licencees to abandon their plans to set up payments banks. "We would certainly feel little aggrieved because lot of efforts from the part of RBI go in processing these applications," Mundra has said.

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