Mumbai: The Reserve Bank of India on Friday has offered an in-principle approval to a partnership of Centrum Financial Services Limited and and Resilient Innovations Private Limited (BharatPe) for commencing a Small Finance Bank.
In a press release, RBI announced having granted an in-principle approval for setting up of an 'on tap' Small Finance Bank to the partnership of BharatPe and Centrum Group. "The RBI would consider granting a licence for commencement of banking business under Section 22 (1) of the Banking Regulation Act, 1949, on being satisfied that the applicant has complied with the requisite conditions laid down by RBI as part of "in-principle" approval.
If successful, this partnership could become the eleventh Small Finance Bank in India after Au Small Finance Bank, Capital Small Finance, Equitas, Suryoday, Ujjivan, Utkarsh, Jana and others.
The RBI note also said that the "in-principle" approval was 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 Punjab & Maharashtra Co-operative Bank Ltd., Mumbai."
According to officials from Centrum and BharatPe, the two entities will have an equal partnership in the new SFB. "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. Starting off with existing capabilities of an NBFC and a Fintech, active and potential customer base, digital reach and technology, should enable the SFB to scale up quickly," said the official source.
Jaspal Bindra, Executive Chairman at Centrum Group, said "We are delighted that a new banking license will be issued to a NBFC after a gap of nearly 6 years and would like to thank the RBI for the opportunity and confidence shown in us. We are excited to partner with BharatPe to create this new age bank, with a strong team."
"We are delighted at the opportunity to build a high performing technology led Small Finance Bank serving the payment, investment and credit needs of the under-served. 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." added Ashneer Grover, CEO and Co-Founder, BharatPe.
The development has given hope to scores of deposit holders of the Punjab and Maharashtra Cooperative Bank who have been waiting for months for a resolution to a moratorium that restricted withdrawals. PMC Bank is a multi-state scheduled co-operative bank with 137 branches across six states. The bank was placed under an All India Directions Moratorium from September 2019 by the RBI.
The fraud at the bank came to the fore after an RBI inspection uncovered large scale manipulation by bank officials and the Chairman at Housing Development and Infrastructure Ltd (HDIL). The Enforcement Directorate as of 2019 filed a 32,959 page chargesheet and estimated the scam at Rs 6,300 crores.
According to the bank's investment reconstruction offer (EoI) dated Nov'02, the bank had total deposits of Rs. 10,727.12 crore, total advances of Rs. 4,472.78 crore and gross NPAs of Rs. 3,518.89 crore as on 31 March'20. The share capital of the bank was estimated at Rs. 292.94 crores. However, the bank registered a net loss of Rs. 6835 crore during 2019-20 and had a negative net worth of Rs 5850.61 crores.
The document had also sought investors to, one, ideally bring in the capital required for enabling the bank to achieve the minimum required capital to risk weighted assets ratio (CRAR) of 9%. The bank was also open to exploring the option of restructuring a part of deposit liabilities into capital/capital instruments. The bank said it was also willing to approach DICGC for its support for payment upto Rs 5 lakhs (insured deposits) to depositors.
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