Relief for PMC Bank depositors after RBI’s nod for Centrum-BharatPe's takeover bid
It was in September 2019 that the Reserve Bank of India (RBI) imposed restrictions on Punjab and Maharashtra Cooperative Bank (PMC Bank). It was barred from carrying out routine business for six months and there would be a cap on how much money depositors could withdraw from their accounts.
PMC Bank was among the large multi-state cooperative lenders, with branches across Mumbai, Delhi, Madhya Pradesh, Gujarat, Goa, Karnataka and Andhra Pradesh. Given that it was once considered among the safer cooperative lenders, the move to impose restrictions sent a wave of panic among its depositors across states.
In the weeks and months following the restrictions, a massive fraud was unearthed at the Mumbai-based lender, wherein dummy accounts were used to hide its huge exposure to the bankrupt real estate developer HDIL. While the restrictions were initially set for six months, they were extended from time to time and the wait of the bank’s deposit holders has stretched for almost two years now.
The bank had 137 branches and deposits of around Rs 11,600 crore, at the time restrictions were announced.
Finally, these deposit holders can heave a sigh of relief with the central bank paving the way for its takeover by an arm of the Centrum Group.
Centrum, along with fintech company BharatPe, had bid for PMC Bank earlier this year. On Friday, the RBI granted in-principle approval to Centrum Financial Services to set up a small finance bank. This will pave the way for it to acquire PMC Bank.
“This “in-principle” approval has been accorded in specific pursuance to the Centrum Financial Services Limited’s offer dated February 1, 2021 in response to the expression of interest notification dated November 3, 2020 published by the PMC Bank,” the central bank said.
The RBI’s in-principle approval is a validation of Centrum’s proven expertise in financial services and BharatPe’s digital leadership, both essential for setting up a new age bank, said Centrum.
“Starting off with existing capabilities of an NBFC and a fintech, active and potential customer base, digital reach and technology, should enable the small finance bank to scale up quickly,” it said.
The Small Finance Bank will be guided by the directions and timelines of the RBI on the amalgamation of PMC Bank, it added.
Ashneer Grover the CEO and co-founder of BharatPe has told a TV channel that Centrum and BharatPe will set up a new entity, where both the parties have equal ownership. This new entity will operate the small finance bank. PMC Bank will then get merged into this small finance bank that will be set up.
Centrum and BharatPe together aim to infuse over $250 million in equity over two years into the small finance bank, which Grover said should be operational by the fourth quarter of the financial year 2022.
“With Centrum as our partner, we are confident that we can create a world-class institution that provides a differentiated and superlative experience to retail customers as well as small businesses,” he said in a separate statement.
The Centrum Group, founded in 1997, has diversified business interests, including investment bank, credit to mid-corporates and small and medium enterprises, wealth management services to high-networth individuals and broking services for foreign institutional investors, pension funds, and domestic institutions, among other things.
BharatPe, on the other hand, is a fintech startup that serves 60 lakh merchants across 100 cities. The company has launched products such as UPI interoperable QR code and zero MDR (merchant discount rate) card acceptance terminals. It processes over 10 crore UPI transactions per month.
It will be after a gap of almost six years that a new banking license is being issued to a non-banking finance company.
For the deposit holders of the PMC Bank, the uncertainties over the fate of the bank may finally be over and they can finally hope to get all their money back from the bank, although they may yet have to wait some more time for that.