Reserve Bank of India allows Centrum to take over Punjab and Maharashtra Co-operative Bank
The Reserve Bank of India (RBI) on Friday cleared the decks for the takeover of scam-tainted Punjab and Maharashtra Co-operative Bank (PMC Bank) by Centrum Financial Services, providing a huge relief to depositors who have waited 21 long months since the apex bank pulled up PMC for fraudulent practices.
The banking regulator has granted an in-principle approval to the combine of Centrum Financial and Resilient Innovations Pvt Ltd, which operates fintech start-up BharatPe, to set up a small finance bank (SFB).
Sources told The Telegraph that after the SFB is formed and approval is received from the RBI, PMC Bank will be merged with the entity.
Centrum Financial Services (Centrum) is the NBFC arm of the Centrum group, and the development would pave the way for its entry into the niche banking segment.
The RBI said it gave the in-principle approval to Centrum for a small finance bank as it had offered to take over PMC. Centrum had made the offer in February in response to the expression of interest floated by PMC in November last year.
The RBI has granted the “in-principle” approval to Centrum for the SFB under the guidelines relating to on-tap licensing to set up these niche lenders in the private sector. Centrum, which was founded in 1997, is led by seasoned banker Jaspal Bindra who was previously the Asia-Pacific Head of Standard Chartered Bank.
With expertise in all the areas of banking, Bindra has been instrumental in diversifying Centrum’s operations from a fee-based business to segments such as housing finance, SME & microfinance. Its board of directors include prominent bankers such as R.K. Kamath, the former chairman of Punjab National Bank and Indian Banks’ Association (IBA), Rajasekhara Reddy, the ex-chairman and managing director of Andhra Bank and R.A. Sankara Narayanan, the former managing director and chief executive officer of Canara Bank.
BharatPe was co-founded by Ashneer Grover — a BTech from IIT Delhi and an IIM Ahmedabad alumni — and Shashvat Nakrani to focus on financial inclusion, particularly for domestic merchants.
In 2018, BharatPe launched India’s first UPI interoperable QR code and the first zero MDR (merchant discount rate) payment acceptance service. In the same year, it also launched the first UPI payment backed merchant cash advance service. BharatPe now serves over 60 lakh merchants across 100 cities and it is a leader in UPI offline transactions, processing more than 10 crore of UPI transactions per month.
The combination of Centrum and BharatPe could, therefore, see the new bank become a digitally strong entity with a huge focus on financial inclusion and priority sector lending. Though its leadership team is yet to be announced, the strong banking expertise of Bindra and others is expected to put the entity on a strong wicket.
“The 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,’’ Centrum said in a press statement after the announcement.
Centrum added that the SFB will be guided by the directions and timelines of the RBI on the amalgamation of Punjab & Maharashtra Co-Operative Bank Limited.
“We are delighted that a new banking licence will be issued to an 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,’’ Bindra, executive chairman, Centrum Group, said while commenting on the development.
In September 2019, the RBI had superseded the board of PMC Bank and placed it under regulatory restrictions, including cap on withdrawals.