Latest News Today – Reserve Bank Of India (RBI) Extends Regulatory

In September 2019, RBI superseded the board of PMC Bank and placed it under restrictions

The Reserve Bank on Friday extended the regulatory restrictions on Punjab and Maharashtra Cooperative (PMC) Bank by another six months till December 2021 to enable the completion of its takeover by Centrum Financial Services. Paving the way for takeover of the crisis-ridden bank, the RBI had earlier in the month granted in-principle approval to Centrum Financial Services to set up a small finance bank (SFB).

“Taking into account the time required for completion of various activities involved in the process…the validity of the …Directive dated September 23, 2019, as modified from time to time, has been extended for a further period from July 1, 2021 to December 31, 2021, subject to review,” the RBI said in a notification.

In September 2019, the RBI had superseded the board of PMC Bank and placed it under regulatory restrictions, including cap on withdrawals by customers, after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL. The restrictions have been extended several times since then.

Initially, the RBI had allowed depositors to withdraw Rs 1,000, which was later raised to Rs 1 lakh per account to mitigate their difficulties. In June 2020, the RBI had extended the regulatory restrictions on the cooperative bank by six months till December 22, 2020. Later it was further extended till June 30, 2021.

In response to an Expression of Interest (EOI) floated by PMC Bank for its reconstruction in November 2020, certain proposals were received. After careful consideration, the RBI said, the proposal from Centrum Financial Services along with Resilient Innovation was found to be prima facie feasible.

Accordingly, the RBI on June 18, 2021 granted ”in-principle” approval to Centrum Financial Services to set up a small finance bank under the general guidelines for ”on tap” Licensing of Small Finance Banks in the Private Sector.

PMC Bank had invited EoI from eligible investors for investment/ equity participation for its reconstruction and had received four proposals. To launch the SFB, the Centrum Group has formed an equal joint venture with Resilient Innovations, an arm of Gurugram-based BharatPe. But Centrum Capital will be the promoter of SFB, under the prevailing laws.

The joint venture will infuse Rs 1,800 crore capital into PMC, Jaspal Bindra, executive chairman of Centrum Group had said.

As of March 31, 2020, PMC Bank’s total deposits stood at Rs 10,727.12 crore and total advances at Rs 4,472.78 crore. Gross NPAs were at Rs 3,518.89 crore at end-March, 2020.

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Latest News Today – Centrum-BharatPe Consortium Will Set Up Bank Within 120

Reserve Bank of India has approval to Centrum Financial Services Ltd to form a small finance bank

With the Reserve Bank of India (RBI) having given a period of 120 days to Centrum Financial Services Ltd (CFSL) to set up a small finance bank, which will eventually take over the troubled Punjab and Maharashtra Cooperative Bank (PMC), the consortium has said that the timeline is “workable” and it hopes to complete the process sooner than that.

Centrum Capital, the holding entity for CFSL, and its partner BharatPe, a payments system company, will infuse Rs 1,800 crore into the small finance bank.

Centrum Capital is the holding entity for CFSL and its partner is BharatPe, a payments system company. RBI last week, had given “in-principle” approval to CFSL to set up a small finance bank.

Talking to NDTV, BharatPe’s Group President Suhail Sameer said, “the timelines are workable and we hope to sort of complete the process sooner.”

Mr Sameer further informed that during the 120-day period while CFSL will set up a small finance bank, the RBI simultaneously will chart out a reconstruction plan for PMC Bank.

“Once we become operational, they (RBI) will take a decision to merge PMC with the small finance bank,” he informed.

Mr Sameer said that for them and the RBI, the interest of the small depositors, who had lost their lives’ savings in the PMC Bank scam, is paramount.

“They have waited for so long, I will ask the depositors to sit tight for some more time and a meaningful outcome will come out of it,” he said.

Elaborating on the process of setting up a small finance bank and meeting the RBI timeline, the BharatPe head said, “we have been communicating with RBI for some time and we are ready and hope to do it sooner. This includes approval from lenders of Centrum to convert its operations into a bank which may take time. Also it requires end audit from RBI for changing operations. However, timelines are workable and we hope to sort of complete the process sooner than later.”

On being asked how does it feel for a newbie digital payments startup like Bharatpe to be on the cusp of becoming half owner of a bank, Mr Sameer said, “It is a great victory for us and a great responsibility.”

He said that the RBI had been watching them and taking note of their performance for quite some time and what the company had achieved in terms of generating payments worth more than billions of dollars in a short span of time, does not happen by fluke.

In addition to this, Mr Sameer said, “in Centrum we have a credible partner and with our combination of conventional lending capabilities and digital capacities, we hope to set up India’s truly digital bank.”

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