Here's how Centrum, BharatPe propose to merge PMC Bank

The Centrum Group and BharatPe have prepared the blueprint for a new small finance bank that will also likely merge with it the operations of Punjab & Maharashtra Co-operative (PMC) Bank that they propose to take over. Non-bank finance company Centrum will initially carve out three sets of businesses — investment banking, lending to small businesses and supply-chain credit — to incorporate into a bank. Financial technology firm BharatPe will bring in its digital platform technology, primarily its flagship QR code, to the proposed small finance bank (SFB).

“The proposed SFB will be a pure retail focus play with maximum digitisation and a pan-India reach,” said Jaspal Bindra, chairman of the Centrum Group. “We will soon be naming the SFB and have embarked on a broad plan to operationalise as soon as possible.”

While the focus will be on retail loans, the good corporate loans of PMC Bank, estimated to be less Rs 1,000 crore, are also likely to be transferred to the new entity. The SFB will manage the corporate loan book till maturity, but will not expand it. Centrum lends to micro, small and medium enterprises, which pay 12-16% interest depending on the nature of loans.

Typically, the loans are of under Rs 25 lakh and its outstanding loans total about Rs 300 crore. The two partners will equally share the Rs 1,800 crore of equity capital they plan to infuse in the SFB. “We will provide our entire digital platform capabilities including our flagship QR code to the proposed small finance bank,” said Suhail Sameer, group president at BharatPe. “We have committed half of the total capital, which will be infused over a period of time.”

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Acquisition of PMC Bank will offer a readymade network of branches to the new entity, but Sameer said the two partners were aiming to set up a highly digital bank with presence of branches across the country instead of high geographical concentration. PMC Bank has 139 branches, about two-thirds of which are based in Maharashtra and the rest in Karnataka, Goa, Gujarat and New Delhi.

Bindra of Centrum said the new small finance bank wouldn’t require any external equity in the first two-three years. But after that, they will be open to bringing in new partners. The third partner could be a foreign investor although talks have not yet started with anybody, he said. The Reserve Bank of India on Friday gave its in-principle approval to float a small finance bank.

A final licence will be issued once the proposed SFB is ready to be operational, provided the regulator does not find any compliance breach. For the takeover of PMC Bank, the central bank will likely propose a resolution plan for the depositors to the government.

PMC Bank’s depositors include individuals, religious trusts and institutions. It is not yet clear how all depositors will get back their money as the final revival plan is not yet ratified.



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