MUMBAI: More than 18 months after Punjab & Maharashtra Cooperative Bank was put under restrictions, the Reserve Bank of India (RBI) today paved the way for its rescue by a consortium of Centrum Financial Services Ltd and BharatPe by granting in-principle approval to set up a small finance bank.

"This ‘in-principle’ approval has been accorded in specific pursuance to the Centrum Financial Services Limited’s offer, dated February 1, 2021, in response to the Expression of Interest (EoI) notification (November 3, 2020) published by the PMC Bank Ltd,” the RBI said in a statement. 

The RBI said that it had granted provisional approval to Centrum to set up a small finance bank under the general Guidelines for On-Tap Licensing of Small Finance Banks in the Private Sector. PMC Bank had invited an EoI from eligible investors for investment and equity participation for its reconstruction and had received four proposals. 

In September 2019, the RBI had superseded the board of PMC and placed it under regulatory restrictions, including cap on withdrawals by its customers, after detection of certain financial irregularities, hiding and mis-reporting of loans given to real estate developer HDIL. The restrictions have been extended several times since then. PMC’s exposure to HDIL was over Rs 6,500 crore or 73 per cent of its total loan book size of Rs 8,880 crore as of September 19, 2019. 

Initially, the RBI had allowed depositors to withdraw Rs 1,000, which was later raised to Rs 1 lakh per account to mitigate their difficulties. In June 2020, the RBI had extended the regulatory restrictions on the cooperative bank by another six months till December 22, 2020. 

As of March 31, 2020, PMC Bank’s total deposits stood at Rs 10,727.12 crore and total advances at Rs 4,472.78 crore. Gross non-performance assets of the bank stood at Rs 3,518.89 crore at end-March 2020.