The Reserve Bank of India (RBI), the central banking system of India, has approved Centrum and BharatPe request to take over controversial Punjab and Maharashtra Co-operative (PMC) bank. The notification was released on Friday. Centrum and BharatPe have a huge responsibility to bring PMC out of the critical situation.
Centrum and BharatPe are the new Owner of PMC
In a recent public statement on Friday, RBI has granted the control of PMC to Centrum-BharatPe. In a detailed statement, RBI said:
“The Reserve Bank of India (RBI) has today decided to grant “in-principle” approval to Centrum Financial Services Limited (the applicant) to set up a small finance bank under general “Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector” dated December 5, 2019.”
RBI further added:
“The RBI would consider granting a license 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.”
In November 2020, PMC released a notice related to take over the bank operations by other parties as per the RBI guidelines. In response to that, RBI received four applications from the private bodies to handle PMC. Centrum also submitted the requisition on February 1, 2021. RBI granted principle approval for Centrum-BharatPe.
How Centrum-BharatPe will Proceed?
As per the official statement released by Centrum Financial Services Limited, both Centrum and BharatPe will be having equal shares in the proposed bank. Initially, both parties will start the banking operations with an investment of Rs 900 crore each in the first year.
Talking about it further, Centrum Group executive chairman Jaspal Bindra said:
“With this, a new banking license will be issued to an NBFC (non-banking financial company) after a gap of nearly six years. We plan to bring Rs.1,800 crore of capital, which would be equally divided between Centrum Group and BharatPe, half of which will be brought in the first year. We will be starting the bank with Rs. 500 crore on day one.”
As per the in-principle approval directions of RBI, Centrum-BharatPe has to start banking operations in four months. Later, this small bank will be collaborated with PMC bank, as per the directions of RBI.
In the current Centrum-BharatPe partnership, Centrum will take care of the banking operations, whereas BharatPe will bring attractive products and will digitize the bank processes.
Talking about BharatPe partnership with Centrum and the latest banking opportunity, BharatPe CEO and co-founder Ashneer Grover said:
“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.”
In September 2019, RBI took over the PMC bank and posted cash withdrawal restrictions due to irregularities in PMC. In the first six months, RBI restricted the cash withdrawal limit to Rs 1000 per account. Later, the limit was increased to Rs 1 lakh in June 2020.
