PremiumThe joint partnership between Centrum Group and BharatPe, will collectively infuse $250 million - $300 million (or upto ₹2224 crore) in Punjab and Maharashtra Cooperative (PMC) Bank, over the next two years, according to BharatPe co-founder Ashneer Grover.
The Reserve Bank of India on Friday cleared the takeover of PMC Bank by a joint partnership of Centrum Financial Services and fintech BharatPe, and granted the former an in-principle approval to set up a small finance bank.
Over the next three months, both BharatPe and Centrum are expected to take over the assets of PMC Bank and make it operational while removing the curbs placed on the bank, including cash withdrawals for depositors.
On 24 September 2019, RBI put severe restrictions on PMC Bank, amid a probe into accounting lapses.
With the takeover, BharatPe now expects to extend its existing relationship with its 6 million offline merchants by offering them savings and current accounts, along with banking and credit services.
“By Q4 of 2021, we are expecting PMC to be a fully functional and operating bank. But how different depositors will be able to withdraw their deposits is what we will disclose over the next few weeks [...] We hope to start providing our merchants with banking and account opening services with PMC Bank on the BharatPe app by January 1, 2022," added Grover in an interaction with Mint.
The takeover will also allow BharatPe to roll out secured loans to its merchant base, which otherwise has been operating largely in the unsecured credit segment.
BharatPe will offer ‘Buy Now Pay Later’ credit services, as its first product to PMC depositors, through its recent acquisition of loyalty platform PAYBACK India.
Grover also added that post the acquisition, PMC Bank will look to offer competitive interest rates to depositors, higher than existing ones in the market.
“We will offer the best interest rates on deposits in the market and expect to take an aggressive stance to differentiate ourselves. That was the reason for the success of certain Indian banks in the industry and we expect to replicate that [...] We could offer better than even 6% in interest rates," said Grover.
Further, BharatPe’s aspiration to takeover PMC Bank also lies in creating a digital-first bank,
While the company looks to roll out its existing suite of products to the Bank’s customers, it will also offer open application programming interface (APIs) to fintechs, and integrate their offerings for PMC Bank’s depositors.
“We will be creating a digital banking product for each segment of depositors and will create APIs to allow fintechs to digitally serve and build products for these customers. We are in the process with Centrum to understand the pain points," added Grover.
The takeover of PMC Bank not just allows BharatPe to offer banking to its merchants, but also improves its ability to lend to its merchant base.
“Earlier we had to rely on other banks to park our (transaction) floats, but now being a bank, our ability to lend to merchants increases, since we do not have to pay additional interest to park these floats," explained Grover.
The startup was lending upwards of $20 million on a monthly basis to offline merchants before the second wave of the covid pandemic hit the country.
BharatPe has disbursed close to $225 million in credit till date and has an outstanding loan book of $100 million. Through its QR codes, BharatPe processes payments worth $10 billion on an annual basis and expects it to reach $30 billion by FY23. It also plans to raise $500 million in debt capital by FY23 to fund its credit operations.
