By Ankur Mishra
With the Reserve Bank of India (RBI) giving Centrum Financial Services a nod in principle to create a small finance bank (SFB), a solution to the problems of the Punjab & Maharashtra Cooperative (PMC) Bank, appears to be in the works. view . The RBI said on Friday that the nod to CFS was given specifically in regards to the latter’s response to PMC Bank’s expression of interest (EoI) on November 3, 2020.
CFS and BharatPe had made an offer to acquire the cooperative lender and the acquisition is expected to be finalized shortly after CFS is licensed. If he were to pass, it would be the third lender in recent times to be rescued after Yes Bank and Lakshmi Vilas Bank.
PMC Bank recorded a net loss of Rs 6,835 crore in FY20, reporting a negative net worth of Rs 5,850.61 crore according to the offering document. In September 2019, PMC Bank was assigned to an administrator appointed by the RBI after the detection of certain financial irregularities.
The regulator had replaced the board of directors and capped customer withdrawals. At the time, PMC’s exposure to real estate company HDIL exceeded Rs 6,500 crore, or 73% of its total loan portfolio of Rs 8,880 crore. HDIL was promoted by Rakesh Wadhawan and his son Sarang Wadhawan and a CBI investigation was opened into the relationship between PMC and HDIL.
Initially, the RBI had allowed depositors to withdraw 1,000 rupees, but this amount was later increased to 1 lakh rupee per account. At the end of March 2020, the total PMC deposits were in the order of Rs 10,727.12 crore while the advances were Rs 4,472.78 crore. Gross non-performing assets (NPA) amounted to Rs 3,518.89 crore. The share capital of the bank is Rs 292.94 crore.
PMC had invited eligible investors to revive it and received four responses. RBI Governor Shaktikanta Das had confirmed that three investors had submitted their final offers for the crisis lender’s resolution. Investors must contribute capital to enable the bank to achieve the minimum mandatory capital to risk-weighted assets (CRAR) ratio of 9%. However, investors can explore the possibility of restructuring part of the deposits into equity instruments, according to the EoI document.