What Is Bharat Pe-Centrum Proposing
According to the first of the two people cited earlier, the reconstruction plan involves creation of a new entity where both BharatPe and Centrum Group will hold 50% stake each. The new entity will seek a small finance bank license from the RBI and will acquire the assets and liabilities of PMC Bank on a slump sale basis, the person said.
As of March 31, 2020, the latest data available, PMC Bank had a deposit base of Rs 10,727 crore and loans worth Rs 4,473 crore.
Both bidders will also be infusing equity into the small finance bank as part of the reconstruction process, which will help restart the banking business. The extent of equity infusion required couldn’t be ascertained.
BharatPe’s payments business and lending to small merchants will continue outside the small finance bank. Currently, BharatPe provides small value credit to merchants it does business with, by on-lending funds it sources from other lenders. However, according to the resolution plan, Centrum Group’s non-bank lending business under Centrum Financial Services Ltd will be merged with assets of PMC Bank. This is to avoid two independent lending businesses under the same umbrella, the person said.
As of March 2021, outstanding loans under Centrum Financial Services stood at Rs 823 crore, according to the latest financials available on Centrum Group’s website. The company saw a rapid rise in outstanding loans in the financial year ended March 2019 after it acquired the supply chain financing business of L&T Financial Services worth Rs 646 crore.
The retail depositors of PMC Bank will be able to access their deposits as they could before. However those with large deposit bases will likely face some initial restrictions, to avoid a run on the bank, the person said. At present, withdrawals of up to Rs 1 lakh per depositor are permitted, which would cover 84% of the bank’s depositors in full.
Discussions are still underway and the contours of the final plan may differ.