RBI Grants Licence To Centrum-BharatPe's Unity Small Finance Bank

The Reserve Bank of India on Tuesday granted a small finance bank licence to a consortium of Centrum Financial Services Ltd. and Resilient Innovations Pvt., BharatPe's parent. The bank, named Unity Small Finance Bank Ltd., will now take over the assets and liabilities of Punjab & Maharashtra Cooperative Bank Ltd.

This is the second step in the resolution process for PMC Bank, after the RBI granted the consortium of Centrum and BharatPe an in-principle approval in June to take over the assets of the insolvent lender.

According to a person in the know, Centrum Financial Services will hold 50.1% stake, while BharatPe will hold 49.9% in the small finance bank.

“We are delighted to receive the licence and excited to partner with BharatPe to create this new age bank, with a strong team," Jaspal Bindra, executive chairman of Centrum Group, said in the statement. "We aspire to be India’s first digital bank.”

The micro, small and medium enterprises loans, as well as microfinance loans under Centrum will be merged into the small finance bank, Centrum Financial Services said in a statement to exchanges. The remaining business, which mostly includes a Rs 600-crore affordable housing finance book, will not be passed on to the small finance bank. Discussions are still underway on what Centrum will do with that book, the person cited earlier said.

As the next step, the RBI will come up with a scheme of amalgamation, which will determine whether depositors have to take any haircuts or not. As of March 31, 2020, the latest data available, PMC Bank had a deposit base of Rs 10,727 crore and loans worth Rs 4,473 crore.

The multistate cooperative bank was put under RBI's directions in September 2019 after serious corporate governance lapses came to light. In a confession letter to the RBI, the bank’s Managing Director Joy Thomas had said that the lender extended loans worth over Rs 6,500 crore to Housing Development and Infrastructure Ltd. in violation of the RBI’s large-exposure norms.

As part of its action against the bank, the RBI had initially limited withdrawals by depositors to Rs 1,000. However, this limit was frequently raised and currently stands at Rs 1 lakh. On Sept. 22, the Deposit Insurance and Credit Guarantee Corp. told depositors that of the 21 stressed banks, including PMC Bank, it will clear claims of up to Rs 5 lakh by Dec. 29.

Those with deposits higher than that will get their dues subject to the final resolution plan decided upon by the consortium, subject to regulatory approvals.