Tag: Unity Small Finance Bank

RBI details draft amalgamation plan for PMC Bank, BFSI News, ET BFSI

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Mumbai: The Reserve Bank of India (RBI) has detailed a draft scheme for the merger of sick Punjab and Maharashtra Cooperative (PMC) Bank with the newly-formed Unity Small Finance Bank Ltd (USFB), more than two years after PMC was put under restrictions on account of fraud that led to a steep deterioration in the networth of the bank.

According to the scheme, deposits of up to 5 lakh can be claimed by depositors over a period of three to 10 years.

The scheme says depositors can claim up to 50,000 at the end of three years, 1 lakh at the end of four years, 3 lakh at the end of five years and 5.50 lakh at the end 10 years.

It may be recalled that the RBI had doubled the amount depositors can withdraw from PMC Bank to 1 lakh from 50,000 in June 2020, allowing more than 84% of the depositors to withdraw their entire account balance. RBI said the above limits are for depositors over and above the withdrawals already made.

According to this schedule, the entire remaining deposits of PMC Bank depositors will be paid back within 10 years from the date the central government notifies this scheme of amalgamation.

Further, the central bank has clarified that interest on these deposits shall not accrue after March 31, 2021 for five years.

“No further interest will be payable on the interest bearing deposits of transferor bank for a period of five years from the appointed date. Provided further that interest at the rate of 2.75% per annum shall be paid on the retail deposits of the transferor bank (PMC), which shall be remaining outstanding after the said period of five years from the appointed date. This interest will be payable from the date after five years from the appointed date,” RBI said.

According to the scheme, 80% of uninsured institutional deposits will be converted into perpetual non-cumulative preference shares (PNCPS) of Unity SFB with dividend of 1% per annum payable annually.

After 10 years from the appointed date, Unity SFB may consider additional benefits for PNCPS holders either in the form of providing a step-up in coupon rate or a call option, upon receipt of approval from RBI.

The remaining 20% of the institutional deposits will be converted into equity warrants of Unity SFB at a price of `1 per warrant. These equity warrants will further be converted into equity shares of the Unity SFB at the time of the initial public offer when it goes for one.

“In respect of every other liability of the transferor bank (PMC), the transferee bank (Unity) shall pay only the principal amounts, as and when they fall due, to the creditors in terms of the agreements entered between them prior to the appointed date or the terms and conditions agreed upon,” RBI said.

“Our shareholders have committed capital of over `3,000 crore through cash and warrants, which will be utilised to build a strong foundation for the bank, hire the right talent and bring best-in-class technology,” Unity Small Finance Bank said in a statement.

In June, RBI had given an in-principle nod to Unity SFB, a joint venture of Centrum Financial Services and Resilient Innovations that runs BharatPe, to take over PMC.



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PMC Bank: Proposed scheme of amalgamation could be a test case for RBI

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The proposed amalgamation of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank with the newly floated Unity Small Finance Bank could be a test case for the Reserve Bank of India (RBI) regarding its approach towards how individual depositors with deposits up to ₹2 crore and those with deposits of ₹2 crore and above can be dealt with when it comes to withdrawal of money.

The Scheme being put together by the central bank is expected to be placed in public domain in a week or so for suggestions and objections from members, depositors and other creditors of transferor bank (PMC Bank) and transferee bank (Unity SFB).

As per Reserve Bank of India (Interest Rate on Deposits) Directions, 2016, a “Bulk Deposit” means a single Rupee term deposit of ₹2 crore and above for Scheduled Commercial Banks (excluding Regional Rural banks) and Small Finance Banks.

So, a deposit of up to ₹2 crore is considered as a “Retail Deposit”.

The question uppermost on individual depositors’ (under the bulk deposit category) mind is whether the central bank will treat retail deposit and individual bulk deposit on an equal footing vis-a-vis withdrawal.

Phased withdrawal

Chander Purswani, President, PMC Depositors’ Forum, said the Scheme should clearly specify the threshold up to which individual deposits can be freely withdrawn and how deposits beyond this threshold can be withdrawn in a phased manner over, say, 3-5 years.

City Co-op Bank wants to emulate PMC Bank for reconstruction

Further, interest accrued on individual depositors’ deposits, be it retail or bulk, should be allowed to be withdrawn in toto.

He underscored that PMC Bank depositors have suffered over the last 26 months amid the Covid-19 pandemic as deposit withdrawal has been capped at ₹1 lakh of the total balance in their account(s) during the entire period that their Bank is under RBI’s Directions.

What this means is that depositors, especially senior citizens (who usually depend on interest earnings to meet monthly expenses), had to make do with only ₹3,846 a month over the last 26 months.

PMC Bank’s resolution could become a template for rescuing other weak UCBs

Purswani assessed that after taking into account deposit withdrawals of up to ₹1 lakh, PMC Bank has about 1.42 lakh depositors with deposits of over ₹1 lakh. Of this, there are about 43,000 depositors, including individuals, trusts, cooperative societies, etc, with deposits of over ₹5 lakh.

DICGC, a wholly-owned subsidiary of RBI, had upped the limit of insurance cover for depositors in the insured banks fivefold to ₹5 lakh per depositor with effect from February 4, 2020.

Individual depositors, including those with large deposits, need an assurance that they can systematically withdraw their money from Unity SFB, the Forum’s chief said.

Limited period incentive

He opined that the Scheme could also incorporate a limited period incentive, whereby PMC Bank depositors can earn higher interest rate over the card rate so that they are encouraged to keep the deposits with Unity SFB.

PMC Bank came to grief as its high exposure to real estate company HDIL turned non-performing.

The central bank red-flagged the fraud/financial irregularities in the bank and manipulation of its books of accounts.

Last month, RBI granted banking licence to Unity SFB, which has been established jointly by the Centrum Financial Services Ltd (CFSL) and Resilient Innovations Private Limited (BharatPe), to carry on SFB business in India.

RBI had accorded “in-principle” approval to CFSL, which is a wholly-owned subsidiary of Centrum Capital Ltd, on June 18, 2021, to set up an SFB.

The “in-principle” approval was in specific pursuance to CFSL’s February 2021 offer in response to PMC Bank’s November 2020 Expression of Interest (EoI) notification.

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RBI, BFSI News, ET BFSI

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Unity Small Finance Bank Limited, a joint venture between Centrum Group and Bharatpe, has commenced operations as a small finance bank with effect from Monday, according to an RBI release.

On October 12, the Reserve Bank gave the final licence to Unity Small Finance Bank, a consortium floated by Centrum Financial Services and Resilient Innovations, an arm of the digital lending platform Bharatpe, four months after giving it an in-principle nod to establish a small finance bank and then takeover the scam-ridden Punjab and Maharashtra Cooperative (PMC) Bank, which was under direct RBI control since mid 2019.

In June, the Reserve Bank had given the in-principle approval for the 12th small finance bank licence to the consortium provided its takes over PMC, the city-based cooperative lender under restrictions for more than two years after a massive over Rs 7,000-crore fraud.

The Centrum group owns 51 per cent in Unity Small Finance Bank and the remaining equity is held by the Gurugram-based Bharatpe.

While giving the in-principle, the RBI said it has been accorded in specific pursuance to the Centrum Financial Services Limited’s offer in February in response to the Expression of Interest published by the Punjab & Maharashtra Co-operative Bank Ltd, Mumbai. PTI NKD MR MR



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Centrum-BharatPe backed Unity SFB commences operations

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The Reserve Bank of India on Monday said Unity Small Finance Bank (Unity SFB) Ltd has commenced operations as a small finance bank (SFB) with effect from November 1.

Unity SFB, which has been jointly established by the Centrum Financial Services Ltd (CFSL) and Resilient Innovations Private Limited (BharatPe) to carry on SFB business in India, was granted banking licence by RBI on October 13.

“The bank, which will be a digital first bank, commences operations with Centrum’s MSME and micro finance businesses and teams that has a capital infusion of about ₹1,100 crore, total assets worth ₹2,400 crore, active customer base of over 2 lakh, 145 offices including a branch in Centrum House, Mumbai,” said Centrum Group and BharatPe in a joint statement.

‘Tech-first products’

Jaspal Bindra, Executive Chairman, Centrum Group, said, “We aim to make it a truly new age bank. The bank is well capitalised, significantly higher than the minimum regulatory requirement (of ₹200 crore), giving us the platform to build a robust technological infrastructure, hire the best talent and work with credible vendor partners.”

Ashneer Grover, Co-Founder and Managing Director, BharatPe, said that with the capitalisation and approvals in place, Unity SFB will now focus on building tech-first products. RBI had accorded “in-principle” approval to CFSL, a wholly owned subsidiary of Centrum Capital, on June 18 to set up a SFB.

The aforementioned approval was in specific pursuance to CFSL’s February 2021 offer in response to the scam-hit Punjab and Maharashtra Co-operative (PMC) bank’s November 2020 Expression of Interestnotification.

Amalgamation process

The grant of banking licence to Unity SFB and commencement of its operations sets the stage for RBI to place in the public domain a draft scheme of amalgamation of PMC Bank with the SFB. The last step will be the government’s sanction for the scheme.

Bindra expects the amalgamation to be complete by next month-end. This development should warm the distressed hearts of PMC bank depositors. They have been struggling to get their deposits back for more than two years amid the Covid-19 pandemic.

Once CFSL takes over PMC bank, it would get a ready-made branch network of about 100 branches in Mumbai and in a few States. CFSL provides credit to small and mid-size companies.

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RBI grants banking licence to Unity Small Finance Bank

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The Reserve Bank of India on Tuesday granted a banking licence to Unity Small Finance Bank Ltd (USFBL), which was established jointly by the Centrum Financial Services Ltd (CFSL) and Resilient Innovations Private Limited (BharatPe), to carry on a SFB business in India.

RBI had accorded “in-principle” approval to CFSL, a wholly owned subsidiary of Centrum Capital, on June 18 to set up a small finance bank (SFB).

The approval was in specific pursuance to CFSL’s February 2021 offer in response to the scam-hit Punjab and Mahatashtra Co-operative (PMC) Bank’s November 2020 Expression of Interest (EoI) notification.

Aid PMC Bank

The grant of banking licence to USFBL sets the stage for RBI to place in the public domain a draft scheme of amalgamation of PMC Bank with the SFB. The last step will be the government’s sanction for the scheme.

Also see: IMF retains India’s growth forecast for FY22 at 9.5%

This announcement should come as a relief to PMC Bank depositors who have been struggling to get their deposits back for more than two years amid the Covid-19 pandemic.

“It is the first time ever that two partners are uniting equally to build a bank. The proposed business model is one of collaboration and open architecture, uniting all its stakeholders to deliver a seamless digital experience,” Centrum and BharatPe said in a joint statement.

Centrum’s MSME and micro-finance businesses will be merged into USFBL.

Digital bank

Jaspal Bindra, Executive Chairman, Centrum Group, said, “We are delighted to receive the license and excited to partner with BharatPe to create this new age bank with a strong team. We aspire to be India’s first digital bank.”

Ashneer Grover, Co-Founder and Managing Director, BharatPe, said “We will work tirelessly and smartly to capture this opportunity and build India’s first truly digital bank ground up.”

With the establishment of USFBL, the number of SFBs in the country goes up to 12.

Also see: RBI on track to policy normalisation

Meanwhile, BharatPe, in a separate statement, said Rajnish Kumar, former Chairman of State Bank of India, has been appointed on its Board. He will also be the Chairman of the Board.

Kumar will be involved in defining the fintech company’s short-term and long-term strategy, and will also work closely with the other Board Members and CXOs on key business and regulatory initiatives, per the statement.

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