Reserve Bank Of India (RBI) Grants In-Principle Approval To Centrum Financial Services To Set Up Small Finance Bank

The Reserve Bank of India (RBI) granted its “in-principle” approval to the applicant – Centrum Financial Services Limited to set up a small finance bank (SFB), which is likely to help the entity in acquiring the scam-hit Punjab & Maharashtra Co-operative (PMC) Bank. The in-principle approval is granted under the central bank’s general guidelines for ‘on tap’ licensing of small finance banks in the private sector’. The move is likely to pave the way towards the resolution of the PMC Bank crisis and help bank’s depositors.

According to an official circular released by the Reserve Bank on Friday, June 18, the central bank would consider granting a licence for the commencement of banking business under Section 22 (1) of the Banking Regulation Act, 1949. This will be granted after being satisfied that the applicant has complied with the requisite conditions laid down by the Reserve Bank as part of ‘in-principle’ approval.

The RBI in its statement said that the in-principle approval has been given in accordance with the specific pursuance to Centrum Financial Services Limited’s offer, in response to the Expression of Interest (EOI) notification dated November 3, 2020, published by the PMC Bank Limited, Mumbai.

Centrum Financial Services along with digital payment platform BharatPe were among the groups that had earlier made submissions to the RBI for the acquisition of the PMC Bank. Centrum Financial is likely to join hands with BharatPe to set up the proposed small finance bank. 

Meanwhile, in September 2019, the central bank imposed restrictions on the fraud-hit urban cooperative bank, including the capping of cash withdrawals by customers, after a scam. After the restrictions, bank depositors held several protests for days demanding their money back.

In the same month, the Reserve Bank had placed the PMC board under suspension, under various regulatory restrictions after the detection of financial irregularities, including the misreporting of loans given to real estate developer HDIL.