The Reserve Bank of India (RBI), which has been trying very hard to find a solution for the Punjab and Maharashtra Cooperative (PMC) Bank crisis, is set to approve takeover by a consortium of Centrum group and BharatPe. On Friday, RBI granted 'in-principle' approval to Centrum Financial Services Ltd to set up a small finance bank (SFB).
In a release, RBI says, "This ‘in-principle’ approval has been accorded in specific pursuance to the Centrum Financial Services' offer dated 1 February 2021 in response to the expression of interest (EoI) notification of3 November 2020 published by the PMC Bank."
Resilient Innovations Pvt Ltd (BharatPe), one of India's fastest-growing fintech companies, will be an equal partner in this venture, Centrum Financial Services says in a release.
Jaspal Bindra, executive chairman, Centrum Group, says, "We are delighted that a new banking license will be issued to a NBFC after a gap of nearly six 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."
"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, chief executive (CEO) and co-founder of BharatPe.
A report from BloombergQuint says, "The assets and liabilities of PMC Bank will then be transferred to the small finance bank. While BharatPe's small business lending portfolio may continue to run outside the small finance bank, the loan assets under Centrum Financial Services are likely to be merged with the new entity."
The PMC Bank scam broke after Housing Development and Infrastructure Ltd (HDIL), a single borrower which accounted for 73% of PMC's loan book, went bankrupt.
HDIL, in collusion with PMC Bank executives, created thousands of fake customer accounts to re-route funds to itself.
Earlier on 24 September 2019, RBI imposed strict restrictions on the Mumbai-based Bank. PMC Bank was also barred from carrying out most of its routine business transactions and depositors were restricted to withdraw only Rs1,000 from their accounts at that time. This limit was raised to Rs1 lakh in June 2020 with which the central bank had said that more than 84% of the depositors of the Bank will be able to withdraw their entire account balance.
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