Paving the way for the takeover of crisis-ridden Punjab and Maharashtra Cooperative Bank (PMC), the Reserve Bank of India on Friday granted in-principle approval to the Centrum Financial Services to set up a small finance bank. Centrum Financial Services was one of the applicants for the takeover of the PMC Bank. Reacting to RBI's in principle approval to Centrum Financial Services, NCUI President Dileep Sanghani in a statement said, ''This is indeed welcome. However, it should be ensured that all the depositors should get back their deposits without any conditionality.'' 

However, he said it would have been better if all the big UCBs should have mobilised the funds together to revive the bank. National Federation of Urban Cooperative Banks and Credit Societies Ltd (NAFCUB) President Jyotindra Mehta said, ''This is in accordance with the wishes of the sector, and the depositors. This will no doubt boost the image of the sector. However, the culprits who committed the fraud in the bank must be punished.” GH Amin, Chairman, Cooperative Bank of India, and Chairman, Gujarat State Cooperative Union welcomed the move. 

''It is a good gesture, of taking over a crisis-hit bank by a small finance bank, and reviving it. The depositors will get an assurance of getting back their deposits.'' National Federation of State Co-operative Banks Ltd (NAFSCOB) MD Bhima Subrahmanyam said, ''The move is indeed appreciable. However, all the depositors should get back their deposits without any conditionality''. Large urban cooperative banks should have taken over PMC Bank and started a small finance bank, as the PMC had an excellent image before the fraud happened, he added. Subrahmanyam is also President International Cooperative Banking Association. On Friday, the RBI gave ''in-principle'' approval to the Centrum Financial Services Limited's offer of February 1, 2021, for the takeover of PMC Bank Ltd. 

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

In September 2019, the RBI had superseded the board of PMC and placed it under regulatory restrictions, including cap on withdrawals by its customers, after detection of certain financial irregularities, hiding and mis-reporting of loans given to real estate developer HDIL. 

The restrictions have been extended several times since then. PMC's exposure to HDIL was over Rs 6,500 crore or 73 per cent of its total loan book size of Rs 8,880 crore 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 restrictions on the cooperative bank by another six months till December 22, 2020. As of March 31, 2020, PMC Bank''s total deposits stood at Rs 10,727.12 crore and total advances at Rs 4,472.78 crore. Gross non-performance assets of the bank stood at Rs 3,518.89 crore at end-March, 2020.