RBI allows Centrum to take over PMC, re-launch it as SFB in JV with BharatPe

Centrum hopes to complete the licence terms and conditions within the next 120 days, and seek the RBI's final approval to launch the small finance 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 an equal joint venture with digital payments start-up BharatPe. 

When launched, it will be the first SFB to come up in nearly six years, after the central bank gave licences to 10-odd players in August 2015 and put such bank licensing under the on-tap mode. 

Earlier in the day, the banking regulator paved the way for the takeover of the crisis-ridden Punjab & Maharashtra Cooperative Bank (PMC) by granting an in-principle approval to Centrum Financial Services, the NBFC arm of Centrum Group, to set up an SFB. 

Centrum Group is primarily into broking, investment banking, wealth management, and travel. 

Following this, late in the evening, Centrum in a statement said its proposed SFB will be in equal partnership with BharatPe's arm Resilient Innovations. BharatPe was established only in 2018. 

''This in-principle approval has been accorded in specific pursuance to the 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. 

The PMC Bank had invited the expression of interest (EoI) from eligible investors for investment/ equity participation for its reconstruction and had received four proposals. 

The RBI said the approval to Centrum to set up a small finance bank is under the general guidelines for 'on-tap' licensing of small finance banks in the private sector. 

''The in-principle approval is a validation of our proven expertise in financial services as well as BharatPe's digital leadership, both essential for setting up a new-age bank,'' Bindra. 

He added that if everything goes as planned, ''we will be the first small finance bank to be operational after a gap of six years''. 

BharatPe co-founder and Chief Executive Officer Ashneer Grover said, ''With Centrum as our partner, we are confident that we can create a technology-led SFB serving the payments, investment and credit needs of the under-served, both individuals as well as small businesses.'' In September 2019, the RBI had superseded the PMC board and placed it under regulatory restrictions, including cap on cash withdrawals, after massive financial irregularities and mis-reporting of loans to realty developer HDIL surfaced. 

The PMC books were so bad that as much as 73 per cent of its assets or over Rs 6,500 crore of its loan book of Rs 8,880 crore were to one account HDIL, and all of them had turned dud as of September 19, 2019. 

Initially, the RBI had allowed depositors to withdraw Rs 1,000 which was later raised to Rs 1 lakh per account to mitigate their difficulties. In June 2020, the RBI had extended the regulatory curbs to 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 (NPAs) stood at Rs 3,518.89 crore. In 2019-20, PMC had 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 fee businesses and a lending platform for institutions and individuals. Institutional services include investment banking, mid-corporates & SME credit and broking. It also provides MSME credit, wealth management to the rich and family offices, affordable housing, and micro finance. It also offers funds across private debt and venture capital through its asset management business. 

BharatPe, founded in late-2018, offers finance platform to small merchants. In the same year 2018, it launched the first UPI interoperable QR code, first zero MDR payment acceptance service, and first UPI payment-backed merchant cash advance service.