Indian IT major Tech Mahindra has decided to abandon its plans to start a payment bank citing a long payback time on its investment as a reason.

The company, which received approval from the country’s central bank for setting up a payment bank in August last year, will now surrender its payments bank licence.

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Commenting on the decision, Tech Mahindra managing director and CEO C P Gurnani said: "Unfortunately due to the competitive pressures the margins started getting squeezed so much that we realised the payback period has become very, very long. Question that Mahindra Finance and us sat together and asked is is this our priority. Is this something where the capital allocation is appropriate. Or should we let this opportunity pass and hope that there will be other areas where we can collaborate and work together like block chain technology or creating other digital solutions instead of becoming a payments bank."

The company collaborated with Mahindra Finance for this project and had said they would be ready by October-November 2016.

Tech Mahindra has become the third license winner to pull out of the race. Earlier, Cholamandalam and the Dilip Shanghvi-IDFC Bank-Telenor Financial Services also announced that they are pulling out of the business.

The Reserve Bank of India (RBI), which initially received 41 applications to start a payment bank, finally gave an in-principle licence to only 11 applicants in August last year. These banks can accept deposits but are not allowed to lend or issue credit cards.

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