Centrum-BharatPe to take over PMC Bank
- Centrum will set up SFB first, which will then merge with PMC Bank
Ending nearly two anxious years for depositors, the Reserve Bank of India (RBI) on Friday cleared the decks for the takeover of Punjab and Maharashtra Cooperative Bank (PMC Bank) by a consortium of non-bank lender Centrum Financial Services and fintech startup BharatPe.
The multi-state cooperative lender was on the brink of a collapse when the regulator seized it on September 24 2019, capped cash withdrawals and launched an investigation into its accounting lapses.
The RBI said it has decided to grant in-principle approval to Centrum to set up a small finance bank under on-tap licensing norms. On-tap licensing refers to the regulator giving out bank licences on a continuous basis, rather than once in several years.
In February, Centrum Financial Services and BharatPe had submitted a joint proposal to take over PMC Bank. Centrum Financial Services is a step-down subsidiary of listed entity Centrum Capital, and provides credit to small and mid-sized companies ranging from ₹2 lakh to ₹2 crore. Resilient Innovations Pvt. Ltd, which operates BharatPe, will be an equal partner in the small finance bank.
“We are delighted that a new banking licence will be issued to an NBFC after a gap of nearly six years and would like to thank RBI for the opportunity and confidence shown in us,” Jaspal Bindra, executive chairman, Centrum Group, said.
“In the first year, we are committed to bring in ₹900 crore of capital and would be equally divided between Centrum Group and BharatPe,” Bindra said. “Then, an additional ₹900 crore will be brought in by the two partners as and when required after the first year. We will be starting the bank with ₹500 crore on day one, and the rest ₹400 crore during the course of the year,” he said. Ashneer Grover, chief executive and co-founder, BharatPe, said it is delighted at the opportunity to build a high-performing technology-led small finance bank serving the payment, investment and credit needs of the under-served.
The RBI said it would consider granting a licence for commencement of banking business under Section 22 (1) of the Banking Regulation Act, 1949, once it is satisfied that Centrum has complied with the conditions laid down as part of the in-principle approval.
The new entity has to be operational in the next 120 days and only when that is done, will the RBI draft a scheme on amalgamation with PMC Bank. The plan will then be sent to the government for approval and official notification. Under Section 45 of the Banking Regulation Act, only a bank can be merged with another and, therefore, the process will start only once the small finance bank is created.
“This in-principle approval has been accorded in specific pursuance to the Centrum Financial Services Ltd’s offer dated 1 February in response to the expression of interest notification dated November 3 2020 published by the Punjab and Maharashtra Co-operative Bank Ltd, Mumbai,” RBI said.