The Reserve Bank of India (RBI) on Friday said it has granted ‘in-principal’ approval to Centrum Financial Services Limited to set up a small finance bank. The approval has been given to Centrum in accordance with the offer it made in response to the expression of interest (EoI) to take over the beleaguered Punjab and Maharashtra Cooperative Bank (PMC).
The consortium of Centrum and Bharat Pe had expressed interest in taking over PMC Bank. According to reports, both Centrum and Bharat Pe will hold 50 per cent stake in the small finance bank and assets and liabilities of the multistate cooperative bank will be transferred to the SFB.
Centrum is planning to issue to raise equity capital through rights issue or a private placement (including but not limited to a qualified institutional placement) in accordance with the provisions of applicable laws. It will look at raising upto Rs 1,000 crore through Non-Convertible Debentures (NCDs).
In 2019-20, PMC Bank’s total deposits stood at Rs 10,727.12 crore with advances at Rs 4,472.78 crore. The bank posted a net loss of Rs 6,835 crore with net worth at a negative Rs 5,850.61 crore.
RBI had placed the bank under restrictions in 2019 following irregularities in the bank. The then head of the bank had written a letter to the RBI wherein he had described the relation of the HDIL’s promoter family Wadhawan with PMC Bank in detail, and how both sides helped each other out.
He had admitted to concealing information from the board, auditors, and regulators, and replacing stressed accounts with dummy accounts. He had also stated that “all the decisions for granting of overdrawals to these accounts was as per my instructions”, and absolved other executives who, he said, had no role except for acting in good faith in executing his instructions.