This Article is From Jun 18, 2021

RBI Grants In-Principle Approval To Centrum Financial To Set Up Small Finance Bank

The Reserve Bank of India granted the in-principle-approval to Centrum Financial Services, to set up a small finance bank, paving the way for the acquisition of the scam-hit PMC Bank

RBI Grants In-Principle Approval To Centrum Financial To Set Up Small Finance Bank

RBI gave its nod for in-principle approval to Centrum Financial Services to set up small-finance bank


  • RBI's approval to Centrum Financial will pave way for PMC Bank takeover
  • In 2019, RBI had placed the PMC Bank board under suspension
  • PMC Bank's NPA stood at Rs 3,518.89 crore at end-March, 2020.

Centrum Financial Services Limited has got the Reserve Bank of India's “in-principle” approval to start a small finance bank, a move that will help the company take over the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank. Centrum was one of the applicants for the takeover of the PMC Bank, whose depositors are still waiting for their money to be freed.

The Reserve Bank of India (RBI) in a circular today said it will give a licence to Centrum to start a small finance bank under the Banking Regulation Act, 1949, only if all conditions are met.

Centrum is a diversified financial services group providing services such as investment banking, microfinance loans, and institutional broking catering to pension funds, mutual funds, domestic institutions, and high-net-worth individuals (HNIs). The PMC Bank had invited Expression of Interest (EoI) from eligible investors for its reconstruction and received four proposals.

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 surfaced. Bank depositors protested for days demanding their money back.

In the same month, the RBI placed the PMC board under suspension over financial irregularities including the misreporting of loans given to real estate developer Housing Development and Infrastructure Limited (HDIL). Around 70 per cent of its total loan book of ₹ 8,383 crore as of March 31, 2019, had been taken by HDIL.

After the central bank superseded the PMC Bank's board, the initial deposit withdrawal restriction of ₹ 1,000 per account was later increased to ₹ 50,000. The withdrawal cap was further increased to ₹ 1 lakh in June 2020. Several depositors who have higher amounts parked in the PMC Bank have not been able to get their money back.

Even with the withdrawal limit raised, more than 84 percent of the depositors of the bank were not able to withdraw their entire account balance, the RBI had notified in an earlier circular.