RBI Prepares Scheme For PMC, Unity Small – Latest news headlines


RBI has prepared a draft plan for PMC Bank’s amalgamation with Unity Small Finance Bank

Reserve Bank of India (RBI) on Monday unveiled a draft scheme for amalgamation of the troubled Punjab and Maharashtra Cooperative Bank (PMC) and Unity Small Finance bank (USFB).

The draft plan proposes USFB taking over the assets and liabilities of PMC Bank including deposits, which would provide a greater degree of protection to depositors.

RBI has sought suggestions or objections, if any, from depositors, members and creditors of PMC Bank as well as of USFB on the scheme by December 10, 2021. After the expiry of the deadline, the central bank will take a final call on the matter.

The plan has been put up on the central bank’s website.

The RBI further said that “USFB is being set up with capital of about Rs 1,100 crore as against a regulatory requirement of Rs 200 crore for setting up of a small finance bank under the guidelines for on-tap licensing of small finance bank in private sector dated December 5, 2019, with provision for further infusion of capital at a future date after amalgamation”.

Maharashtra-based PMC Bank was placed under business restrictions with effect from September 23, 2019, on account of fraud, which led to steep deterioration in the net worth of the bank.

The directions were last extended through a June 25, 2021 directive up to December 31, 2021.

“Given the financial condition of the PMC Bank and in the absence of proposals for capital infusion, the bank was not viable on its own. In that event, the only course of action could have been cancellation of its licence and taking it for liquidation, wherein depositors would have received payment up to the insurance ceiling of Rs 5 lakh,” the RBI said.

Keeping in mind the interest of its depositors, the amalgamation scheme has been unveiled, which would provide them protection, the central bank said.



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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In September 2019, RBI superseded the board of PMC Bank and placed it under restrictions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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Deccan Urban Co-operative Bank Withdrawls Capped At Rs | Sidnaz Blog


The central bank imposed the withdrawl cap on Deccan Urban Co-op bank citing its financial position

The Reserve Bank of India (RBI) has imposed a withdrawal cap of Rs 1,000 on customers of the Deccan Urban Co-operative Bank and has barred the lender from granting new loans or accepting deposits due to its liquidity position. The Karnataka-based lender is restricted to undertake any fresh business, including renewing any fresh loans or making new investments. The central bank said that the directions for the bank will remain in force for six months from the close of business on February 19 and are subject to review. ”Considering the bank’s present liquidity position, a sum not exceeding Rs 1,000 only of the total balance across all savings bank or current accounts or any other account of a depositor may be allowed to be withdrawn, said the RBI In a statement late on Friday, February 19.

The Deccan Urban Cooperative Bank customers can set off their loans against deposits subject to conditions. The central bank said it issued the directions to bank’s chief executive officer. According to the Reserve Bank of India’s statement,  99.58 per cent of the depositors are fully covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance scheme, a wholly-owned subsidiary of the central bank itself, and provides insurance cover up to Rs 5 lakh on bank deposits.

The Reserve Bank added that putting the bank under specific restrictions should not be construed as a cancellation of its banking licence. Deccan Urban Co-operative Bank will continue to undertake banking business with restrictions till its financial position improves.

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Over the past few years, the Reserve Bank of India has been cracking down on weak cooperative banks. In 2020, the central bank canceled permits of three cooperative banks and imposed restrictions on several other banks.



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