Centrum faces multiple riders as it readies to take over PMC

The new non-operative financial holding company (NOFHC) will be Centrum Financial Services Ltd (CFSL), which will likely transfer its lending business to the SFB.

The Reserve Bank of India (RBI) has placed multiple riders while approving Centrum Financial Services and BharatPe’s proposal to start a small finance bank for taking over crisis-ridden Punjab and Maharashtra Cooperative Bank (PMC Bank).

RBI said the Centrum group will have to transfer its stake in the proposed bank to a NOFHC within 3.5 years from the date of receiving the nod. (Reuters file photo)

In its letter giving an in-principle approval, RBI said the Centrum group will have to transfer its stake in the proposed bank to a non-operative financial holding company (NOFHC) within three and a half years from the date of receiving the nod.

The new NOFHC will be Centrum Financial Services Ltd (CFSL), which will likely transfer its lending business to the SFB.

The group will also have to bring all other regulated entities under NOFHC in the same period. It comprises Centrum Housing Finance, Centrum Microcredit, Centrum Wealth, Centrum Broking, Centrum Insurance and Centrum Alternatives, according to the letter, a copy of which was reviewed by Mint. The RBI said that as long as Centrum holds a majority stake in Centrum Housing Finance and Centrum Microcredit, the new SFB won’t be allowed to do home loan and microcredit business.

“As per the regulations, no two entity can do the same kind of business. Hence, Centrum will have to take a call on whether to sell stake in the arms or merge it with the SFB,” said R. Gandhi, former deputy governor, RBI.