Tech Mahindra was among the 11 entities successful applicants that received the Reserve Bank's nod to set up payment banks as part of financial inclusion drive.
The bank will be an independent unit under the Mahindra Group led by Tech Mahindra and Mahindra Finance, a rural NBFC, as equal contributors to the new entity, Tech Mahindra said in a statement.
The ultimate vision is to create a technology-led Payment Bank that will reach every customer in India, it added.
This initiative will contribute to the creation of a truly 'Digital India' that empowers every citizen to enhance the quality of their lives, he added.
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Tech Mahindra already has a licence from the RBI to run a prepaid wallet business. It operates in the market under the brand name - Mobo Money.
"We are the only company that has launched and rolled out NFC-based payment ecosystem (Tap n Pay) that provide excellent user experience and is suitable for low literacy population," Tech Mahindra CEO & MD C P Gurnani said.
"Its impact will be felt across small savings accounts, remittance services, low income households, small businesses, unorganized sector entities etc, by enabling high volume-low value transactions in deposits and payments," it added.
Companies run by billionaires Mukesh Ambani and Kumar Mangalam Birla as well as telcos Bharti Airtel and Vodafone are among the 11 entities that got approval to set up such niche banks.