The small financing bank Centrum-BharatPe will have a capital of 500 crore on the first day

Even if the Reserve Bank of India (RBI) approves Centrum Group and BharatPe’s offer to take over the Punjab and Maharashtra Cooperative (PMC) Bank, depositors will not receive their dues immediately. Centrum and BharatPe will first have to set up the small financing bank within 120 days and only then will RBI prepare a draft proposal for the merger with PMC. Speaking to Mint, Jaspal Bindra, executive chairman of Centrum Group, said management plans to launch the bank with ₹500 crore in capital on the first day.

What is the capitalization plan of your small financing bank?

In the first year, we are committed to bringing ₹900 crore of capital and would be divided equally between the Centrum group and BharatPe. Then additional ₹900 crore will be provided by two partners as and when needed after the first year. We will start the bank with ₹500 crore the first day and the rest ₹400 crore during the year.

How long do you think the merger with PMC Bank will take?

We have 120 days (from today) to operationalize the bank. Once that is done, the central bank will draft a plan that will deal with the merger of PMC Bank with our small financing bank. Then it will go to the government for approval and official notification. You see, this is the process, and I wouldn’t be able to say how long it would take. Under Article 45 of the Banking Regulation Act, a proposed merger can only be prepared between two banks, and therefore the process will not begin until after we have been converted into a bank.

When can depositors expect to access their funds and do you anticipate a leakage of deposits?

At present, the claims of the depositors are much larger than the money of PMC Bank. This gap must be closed. So, of course, there is also a risk of deposit leakage. Since they had a bad experience, it’s hard to say what they would do but we will try to inspire them and find ways to hold back as much as possible. But we don’t know what it will be.

What is PMC Bank’s loan management plan?

We will recast the balance sheet at the date of the merger and will have the opportunity to note part of it. Regardless, their business is largely focused on wholesale lending, which we don’t intend to do in our small corporate bank. This is not a book that we are going to develop. Centrum Financial Services has a loan portfolio of approximately ₹1000 crore at present.

How important will digital banking services be to your business?

Clearly, we are going to be a pure retail bank and we will try to do 80% digital transactions there. I say this with some confidence because we are going to merge Centrum’s micro, small and medium enterprise (MSME) business with the bank and it is already 80% digital. However, the microfinance business would not be transferred to the bank from day one as it is not part of the plan.

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