Centrum-BharatPe small finance bank to have ₹500 crore capital on day one
2 min read 18 Jun 2021, 09:39 PM ISTCentrum and BharatPe will first have to set up the small finance bank within 120 days and only then RBI will prepare a draft proposal for the merger with PMC.
PremiumEven as the Reserve Bank of India (RBI) clears Centrum Group and BharatPe’s bid to take over Punjab and Maharashtra Cooperative (PMC) Bank, depositors will not get their dues immediately. Centrum and BharatPe will first have to set up the small finance bank within 120 days and only then RBI will prepare a draft proposal for the merger with PMC. Speaking to Mint, Jaspal Bindra, executive chairman of Centrum Group said, the management plans to start the bank with ₹500 crore of capital on day one.
What is the capitalization plan for your small finance bank?
In the first year we are committed to bring in ₹900 crore of capital and would be equally divided between the Centrum Group and BharatPe. Then additional ₹900 crore will be brought in by two partners as and when required after the first year. We will be starting the bank with ₹500 crore on day one and the rest ₹400 crore during the course of the year.
How long do you think the amalgamation with PMC Bank will take?
We have been given 120 days (from today) to operationalize the bank. Once that is done, the central bank will draft a scheme which will be about the amalgamation of PMC Bank with our small finance bank. Then it will go to the government for approval and official notification. See, this is the process, and I would not be able to say how long that would take. Under Section 45 of the Banking Regulation Act one can only prepare a merger scheme between two banks and therefore the process will start only once we have been converted into a bank.
When can depositors expect access to their funds, and do you foresee a flight of deposits?
At present, the depositors’ claims are much larger that the money in PMC Bank. That gap has to met. Then, of course, there is a risk of flight of deposits as well. Since they have had a bad experience, it is difficult to say what they would do but we will try to incentivize and find ways to retain as much as possible. But we do not know what that will be.
What is the plan to manage the loans of PMC Bank?
We will recast the balance sheet at the date of amalgamation and will have the opportunity to write some of it down. Anyway, their business is largely in wholesale loans, which is not what we intend to do in our small finance bank. It is not a book we are going to grow. Centrum Financial Services has a loan book of about ₹1,000 crore at present.
How important will digital banking be in your business?
Clearly, we are going to be a pure-retail bank and we will try to achieve 80% digital transactions in it. I say that with some confidence because we are going to merge Centrum’s micro, small and medium enterprise (MSME) business with the bank and it is already 80% digital. However, the micro-finance business would not move to the bank on day one as it is not part of the plan.
