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The Reserve Bank of India (RBI) on Tuesday issued a small finance bank licence to a consortium of Centrum Financial Services Ltd and Resilient Innovations Pvt. Ltd (BharatPe), Centrum said in an exchange filing. The new SFB has been incorporated as ‘Unity Small Finance Bank’.

“It is the first time ever that the two partners are uniting equally to build a bank. The proposed business model is one of collaboration and open architecture, uniting all its stakeholders to deliver a seamless digital experience," Centrum said in the exchange filing.

In June, RBI granted in-principle approval to Centrum to set up a small finance bank, which will later take over the assets of Punjab and Maharashtra Cooperative Bank (PMC Bank).

While it is not clear when RBI will transfer the assets of PMC Bank, Centrum hopes to start the operations of the SFB in a month’s time.

Centrum’s MSME and Microfinance businesses shall be merged into the bank.

“The SFB will start with a loan book of 1,500 crore, focused only on retail lending through digital channels. We plan to have a national reach likely through this digital channel rather than physical presence," Jaspal Bindra, executive chairman of Centrum Group, said in an interview.

Both Centrum and BharatPe will hold equal stakes in the bank. The joint venture will infuse 1,800 crore capital into the bank over time.

Bindra added that the bank will now start the .search to appoint a chief executive officer and set up the board, which he will be a part of. However, the existing management of Centrum’s merged business will continue, he added.

“Under the new governance rule, the chairman is independent. It will be difficult for people from BharatPe or Centrum to be the chair of the board," Bindra said. “We would like to have the board as compact as possible. We can grow that over a period of time," he added.

According to Bindra, the bank is still figuring out its liability strategy. However, it is going to rely on its equity capital to grow its asset book.

In February, Centrum Financial Services and BharatPe had submitted a joint proposal to take over PMC Bank. Centrum Financial Services is a step-down subsidiary of listed entity Centrum Capital and provides credit to small- and mid-sized companies ranging from 2 lakh to 2 crore.

The multi-state cooperative lender was on the brink of collapse when the regulator seized it on 24 September 2019, capped cash withdrawals and launched an investigation into its accounting lapses.

The regulator then put in place an administrator who called for bids to take over the bank.

In the recent monetary policy meeting, deputy governor Rajeshwar Rao said that RBI will proceed with the draft scheme for amalgamation and get the requisite approvals soon.

Once the draft scheme for amalgamation or reconstitution is ready, it is expected to be put in the public domain for comments. Thereafter, it will be notified through the gazette.

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