The Reserve Bank of India (RBI) has decided to grant "in-principle" approval to Centrum Financial Services Limited to set up a small finance bank, thus paving way for the takeover of beleaguered Punjab and Maharashtra Cooperative Bank 18 months after it was place under restrictions.
The RBI approval came after Centrum Financial Services, along with Bharat Pe, submitted an expression of interest to take over PMC Bank. The approval has been granted under general "guidelines for 'on tap' licensing of small finance banks in the private sector" dated December 5, 2019".
"The RBI would consider granting a licence for commencement of banking business under Section 22 (1) of the Banking Regulation Act, 1949, on being satisfied that the applicant has complied with the requisite conditions laid down by RBI as part of 'in-principle' approval," a statement said.
The RBI circular said this "in-principle" approval has been accorded after the Centrum Financial Services Limited's February 1 offer in response to the expression of interest notification on November 3, published by Punjab & Maharashtra Co-operative Bank Ltd, Mumbai.
The RBI had recently approved the takeover of PMC Bank by Centrum by allowing it to set up a small finance bank. PMC Bank was put under several restrictions in September 2019. The curbs included restrictions on withdrawals of cash and investigation into accounting lapses.
The central bank discovered the lender allegedly created fictitious accounts to hide over Rs 6,700 crore in loans extended to the almost-bankrupt Housing Development Infrastructure Ltd (HDIL). The urban cooperative bank and the RBI have been exploring avenues for its resolution and recovery of bad loans.
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