Diversified financial services player Centrum Group said on Friday it had received approval in principle from the Reserve Bank of India (RBI) to take over struggling cooperative lender PMC Bank and revive it as a small financial bank.
Centrum hopes to complete the terms and conditions of the license within the next 120 days and seek final approval from the RBI to launch the small fundraising bank and take over PMC, Centrum Group Executive Chairman Jaspal Bindra said.
The group said it will launch the proposed Small Finance Bank (SFB) as a 50/50 joint venture with digital payments start-up BharatPe.
Once launched, it will be the first SFB to appear in nearly six years, after the central bank licensed around ten players in August 2015 and put those banking licenses into on-the-fly mode.
Earlier today, the banking regulator paved the way for a takeover of the crisis-stricken Punjab & Maharashtra Cooperative Bank (PMC) by granting in-principle approval to Centrum Financial Services, the NBFC arm of Centrum Group, to put in place an SFB.
Centrum Group is primarily in brokerage, investment banking, wealth management and travel.
Following this, late in the evening, Centrum in a statement said that its proposed SFB would be in equal partnership with Resilient Innovations, the arm of BharatPe. BharatPe was only created in 2018.
“This approval in principle has been granted pursuant to Centrum Financial Services’ offer dated February 1, 2021, in response to the expression of interest notification issued on November 3, 2020 by PMC Bank,” the RBI said in a statement. communicated. declaration.
PMC Bank had solicited expression of interest (EoI) from eligible investors for an investment / equity investment for its reconstruction and had received four proposals.
The RBI said Centrum’s approval to establish a small finance bank falls within the general guidelines for “online” licensing of small private sector finance banks.
“The approval in principle is a validation of our proven expertise in financial services as well as BharatPe’s digital leadership, both essential to building a new age bank,” Bindra.
He added that if all goes according to plan, “we will be the first small financial bank to be operational after a six-year gap.”
BharatPe Co-Founder and CEO Ashneer Grover said, “With Centrum as a partner, we are confident that we can create a technology-driven SFB that meets the payments, investment and credit needs of underserved people, both small businesses. In September 2019, the RBI replaced PMC’s board and subjected it to regulatory restrictions, including a cap on cash withdrawals, after massive financial irregularities and poor reporting of loans to the property developer. HDIL have surfaced.
PMC’s books were so bad that up to 73% of its assets or more than Rs 6,500 crore from its Rs 8,880 crore loan book was in one HDIL account, and all of them became void on September 19. 2019.
Initially, the RBI had allowed depositors to withdraw 1,000 Rs, which was later increased to 1 lakh Rs per account to ease their difficulties. In June 2020, the RBI extended the regulatory borders until December 2020.
As of March 2020, PMC had deposits of Rs 10,727.12 crore and advances of Rs 4,472.78 crore, while its gross non-performing assets (ANP) stood at Rs 3,518.89 crore. In 2019-2020, PMC recorded a net loss of Rs 6,835 crore and a negative net worth of Rs 5,850.61 crore.
Founded in 1997, the Centrum Group has diversified commission activities and a lending platform for institutions and individuals. Institutional services include investment banking, credit and brokerage to medium-sized businesses and SMEs. It also provides credit to MSMEs, wealth management to the rich and family offices, affordable housing and micro-finance. It also offers private debt and venture capital funds through its asset management business.
BharatPe, founded at the end of 2018, offers a financing platform for small traders. In the same year 2018, it launched the first interoperable UPI QR code, the first MDR zero payment acceptance service, and the first UPI payment-backed merchant cash advance service.