For Jaspal Bindra, who headed Standard Chartered Bank’s Asia operations in his 40s, the road back to banking is a challenging one. Bindra, who exited StanChart to turn entrepreneur by acquiring a stake in in 2016, will have to build a bank by merging operations of a failed local cooperative, a non-banking finance company and a new age digital lender.
For Bindra, who has been pursuing a bank licence for some time, the RBI’s quest for a white knight for Punjab and Maharashtra Cooperative Bank (PMC) provided that opportunity. The RBI has granted Centrum 120 days to convert itself into a bank with
player BharatPe as an investor who will merge its payment business with the bank. “We are seeing it as a bank which PMC will be a part of and not a takeover. We are capitalising it abundantly so that we will have room to do other things and PMC’s operations will not dominate the new bank,” said Bindra.
“As against the Rs 200-crore minimum capital required for a small finance bank, we are committing to bringing in Rs 900 crore in the first year and we have further committed Rs 900 crore from both of us. In all, we are committing Rs 1,800 crore,” said Bindra. He added that currently the partners are self-sufficient for capital and funds would be raised only at a later day.
Bindra agrees that PMC Bank has a large hole in its books which Centrum examined in January before making the bid. It is not yet clear to what extent the hole will get filled as the Deposit Insurance and Credit Guarantee Corporation would pay out depositors only after the RBI invokes Section 45 of its Act which has the same effect as a bankruptcy resolution and does not leave scope for any additional payments outside the plan notified by the government.
Both Centrum and Bharat Pe will have to follow RBI’s diktat and undertake all financial businesses within the new bank and not in group companies. This means that the bank will begin with Centrum’s sizeable loan book and BharatPe’s large payment business.
“The PMC loan book is wholesale which is not part of our business, and this will be a runoff. This will not exist in our future as we want to be a pure digital play with over 85% of business being done on the digital platform. The offline presence will be for only those segments of society without digital access,” said Bindra.
The government notification will also determine the terms for the staff of PMC Bank. “For PMC staff we will have to see what comes in the government notification. For our existing staff, we are going to choose the best person between Centrum, BharatPe and the market. We are going to plan talent for the longer term. It does not mean that there will be layoffs as there will be jobs outside the bank for Centrum and BharatPe,” said Bindra.
While there is no guarantee that customers will retain their deposits once the new bank opens its doors, Bindra sees value in the retail deposit franchise. “The branch network is relevant from deposit collection point. They were quite exceptional in their service quality, and we will be happy to have the staff as a valuable addition to the group. They have Finacle which is a leading software platform,” said Bindra. Besides the amalgamation of unlikely partners, the PMC resolution is an experiment at several levels. This is the first time that the RBI is using the lure of a bank licence to refloat a failed bank. This would also be the first time that an old-world business is being moved onto a digital system.