A new small finance bank — the first to be approved in six years — jointly owned by Centrum Financial Services Ltd and BharatPe is all set to rescue the scam-hit Punjab and Maharashtra Co-operative Bank (PMC). The Reserve Bank of India has blessed the deal by granting in-principle approval to Centrum Financial Services to set up the small finance bank.


Under this plan, Centrum will first operationalise the SFB in 120 days. Thereafter, the RBI will place in public domain a draft scheme of amalgamation of PMC Bank with Centrum SFB. Mobile payments firm BharatPe will hold 50 per cent in the newly-created SFB. The last step will be the government sanction for the scheme. According to industry estimates, all this can take about six months if there are no legal challenges or objections raised by any of the stakeholders.

₹900-cr commitment

Jaspal Bindra, Executive Chairman, Centrum Group, said that CFSL and BharatPe will commit ₹900 crore to the SFB in the first year. As and when required, the partners will commit ₹900 crore more. The minimum paid-up net worth requirement for starting an SFB is only ₹200 crore. Once CFSL takes over PMC Bank, it would get a ready-made branch network of about 100 branches in Mumbai and in a few States.

CFSL is a step-down subsidiary of diversified financial services group Centrum Capital. It provides credit to small and mid-size companies.

The RBI, in a statement, said the ‘in-principle’ approval has been accorded in specific pursuance to CFSL’s offer of February 1, 2021 in response to the Expression of Interest issued by Mumbai-based PMC Bank.

The “in-principle” approval is under the general Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector” dated December 5, 2019 .

As at March-end 2020, PMC Bank had total deposits of ₹10,727.12 crore (₹11,617.34 crore as at March-end 2019), and total advances of ₹4,472.78 crore (₹8,383.33 crore), according to the bank’s FY2019 annual report.

A long wait

Reacting to the development, Chander Purswani, President, PMC Depositors Forum, said that there is still no clarity on when the depositors would get their money back. “We need to understand from them (the RBI and Centrum) how we are going to get the payment… what will be the initial amount, whether the rest of the money will be given in phases, whether the retail depositors will get all their money, etc.”

Sanya Chhabria, a PMC Bank depositor, said: “We have been waiting for this good news for the last 20 months. Now, we really need to know when we will get our money, whether payments will be spread over two years, three years, whether we will get 100 per cent or not.”

PMC Bank was placed under directions by the RBI from the close of business on September 23, 2019. The RBI took this action as PMC Bank’s financial position deteriorated substantially due to fraud/financial irregularities allegedly perpetrated by a real estate group and certain bank officials and manipulation of its books of accounts.

The RBI had capped deposit withdrawal (₹1 lakh per depositor for the entire period of the directions).

The total AUM of the Centrum group's lending business is around ₹2,000 crore. This mainly comprises micro-finance and lending to MSMEs. In the nine months ended December 31, 2020, the Centrum Capital’s consolidated net loss widened to ₹36.26 crore against ₹24.33 crore in the year ago period.