Centrum & BharatPe eyes PMC Bank for Amalgamation

In a continuous effort to expand the financial services, Fintech startup company BharatPe and a financial service company Centrum have submitted an expression of interest (EoI) to the Reserve Bank of India (RBI) to collaborate with Punjab and Maharashtra Cooperative (PMC) Bank, which has fallen into trouble nowadays.

Bharat Pe and Centrum Group are among four groups that have made the submissions to the Reserve Bank of India (RBI) for the acquisition, according to a report in the Times of India. Meanwhile, both Bharat Pe and Centrum will hold equal stakes in the venture. Centrum Group is owned by Jaspal Bindra, a former Standard Chartered honcho.

As per the Times of India report BharatPe and Centrum Group, are among those four companies that have sent a request or EoIs to the RBI to collaborate with PMC Bank. Centrum and Bharatpe for merchants are led by former Standard Chartered bank chief Jaspal Bindra. Although BharatPe has not made any statements related to the topic yet, Bindra confirmed that there are two companies that have sent submissions to the RBI for the acquisition or amalgamation with PMC Bank. According to the news report, Steel baron Sanjeev Gupta’s Liberty House Group has also offered an EOI to the RBI. The fourth contenders’ name is not yet known.

RBI had prolonged the restrictions on PMC bank on the previous week till March 2021, after a slew of NPAs that led to a decline in the company’s prestige or had brought the bank to its knees last year. Reserve Bank of India is likely to examine the proposals of potential suitors. PMC Bank had been into the negative limelight due to its mishandling of funds and loans. The public sector bank had allegedly created false accounts to hide over INR 4,355 Cr of loans extended to bankrupt institutions.

This is the first time that NBFCs (Non-Banking Financial Companies), corporates, and high-net-worth individuals have shown keenness in acquiring an urban-cooperative bank (UCB).

If the acquisition is gained by Bharat Pe it will boost its lending business as it aims to build a Rs 5,000 crore loan book in two years.
The Delhi-based startup Centrum will bring in its tech capabilities in addition to the core financial services expertise of Mumbai-based Centrum Group and run PMC Bank as a small finance bank.
“They want to co-run it as a digital-first bank. For BharatPe, this will reduce the cost of capital. It has been wanting to lend on its own, instead of doing it only through its partner NBFC,” a source informed the publication.
The RBI through documentation had invited companies who are willing to invest in PMC Bank to purchase the property. It had mentioned that it would be open to new investors wanting to run PMC Bank as a small finance bank.

On December 18 The Reserve Bank of India said that PMC Bank has received four Expressions of Interest (EoI) but hasn’t revealed the collaborators yet. On keeping patience the banking regulatory authority has extended the constraints on PMC Bank by another three months till March 31, 2021.
“The PMC bank has informed Reserve Bank of India that in response to EoI, they have come up with around four proposals. These proposals will be examined by the Reserve Bank of India concerning their viability and feasibility taking into account the best interest of the investors. To undertake this process, the bank would need some more time,” the central bank said in a statement.

The RBI had outmoded the board of PMC Bank in September 2019 after their fraud was disclosed. The report also comes soon after an RBI internal working group (IWG) recently proposed that large non-banking financial corporations (NBFCs) and corporate houses should be given banking permits.

If we talk about the records then as of March 2020, PMC Bank had deposits of Rs 10,727 crore, total advances of Rs 4,473 crore, and gross non-performing assets (NPA) of Rs 3,519 crore. The share capital of the bank is Rs 293 crore. But the bank registered a net loss of Rs 6,835 crore during the financial year ended March 2020 with a negative net worth of Rs 5,850 crore.
Despite the negative image it has built for itself. PMC Bank is beneficial and profitable for many firms as it has a network of around 137 branches, that includes important locations in Mumbai and an investor base of nearly high net worth.