Reported by: banking|Updated: June 20, 2021
The Reserve Bank of India has granted ‘in-principle’ approval to NBFC Centrum Financial Services to set up a small finance bank, which on formation will take over the beleaguered Punjab Maharashtra Cooperative Bank. The plan is for Centrum Capital, a unit of Centrum Financial Services, and its partner BharatPe, a payments system company, to infuse Rs 18 billion which will form the capital of the proposed small finance bank. The 2 entities will get 180 days to set up the small finance bank. It is expected that the Government will notify the plan for the small finance bank to take over PMC Bank. Centrum Capital is a public limited company, headed by Jaspal Bindra, who was earlier CEO of Standard Chartered Bank Asia. Bindra said Centrum and BharatPe will put in Rs 9 billion in the first year in the proposed small finance bank, which will be used for starting the business and acquiring PMC Bank. The second round of equity funding will happen in the following year, he added. Ashneer Grover, CEO and Co-founder, BharatPe, said his company is delighted at the opportunity to set up a high-performing technology-led small finance bank serving the payment, investment, and credit needs of the under-served. PMC Bank had been placed under restrictions in September 2019 after it was found that the bank and its management had done several under-hand dealings, leading to losses. In 2019-20, the bank’s deposits stood at Rs 107.27 billion and advances at Rs 44.72 billion. The bank had posted a net loss of Rs 68.35 billion with its net worth at a negative Rs 58.51 billion. Satish Marathe, Director on the Central Board of the RBI and founder-member of Sahakar Bharati, thanked Finance Minister Nirmala Sitharaman and said it is a welcome development, which will provide relief to the depositors of PMC Bank.