Aditya Birla Idea Payments Bank shut after 17 months; Vodafone Idea wrote off Rs 210 crore

Aditya Birla Idea Payments Bank (ABIPBL), promoted by Grasim Industries (51%) and Vodafone Idea (49%), received its Reserve Bank of India payments bank licence on April 3, 2017, and began operating on February 22, 2018. On July 20, 2019, nearly 17 months later, its board approved a voluntary winding up, saying "unanticipated developments" had made the economic model unviable. It was the fourth payments bank to shut down after Tech Mahindra, Cholamandalam and a consortium including Dilip Shanghvi, IDFC Bank and Telenor.

The scale was small. Sources told PTI that deposits stood at about Rs 20 crore and the bank had about 200 employees, most likely to be absorbed elsewhere in the group. ABIPBL reported a loss of Rs 24 crore at the end of 2017-18. The group said full arrangements were made to return customer deposits, and that closure could take about three months.

The bank was also meant to absorb Vodafone m-pesa. On the company's earnings call, Vodafone Idea CEO Balesh Sharma said that merger was called off and the m-pesa vertical would be closed, attributing the decision to regulatory changes for the payments bank business and a deterioration in the health of the telecom sector. Vodafone Idea CFO Akshaya Moondra said the June quarter included an impairment of Rs 2.1 billion (Rs 210 crore) across the payments bank and m-pesa entities.

The bank's owners said the economic model became unviable because of unanticipated developments, without detailing them in the filing.

Vodafone Idea's CEO pointed to regulatory changes for payments banks as one reason for the closure.

The telecom parent was under heavy pressure; Vodafone Idea was losing subscribers to Reliance Jio and said it wanted to focus on its core telecom business.

Deposits of about Rs 20 crore and a Rs 24 crore loss in 2017-18 left little scale to build on.

A licence is not a business model. If the regulation your economics depend on can shift under you, a venture built to piggyback on a telecom base can end up with neither scale nor margin.

The payments bank stayed open for limited transactions so customers could withdraw or transfer balances while it closed. Vodafone Idea stopped running its own m-pesa and said it would explore partnerships with fintech companies instead.