'RBI has given us 120 days to operationalise SFB'

'Only when we are part of the same family, which will happen down the line, then, of course, we will give them (PMC depositors) all the assurance and the comfort.'

With the Reserve Bank of India granting in-principle licence to Centrum Financial Services Ltd to set up a small finance bank, it paved the way for the revival of the PMC Bank as the NBFC had expressed its interest for the revival of the troubled lender.

In an exclusive interview with Manojit Saha/Business Standard, Jaspal Bindra, the executive chairman of the Centrum group, said it has committed Rs 1,800 crore (Rs 18 billion) capital to the small finance bank (SFB), Rs 900 crore (Rs 9 billion) of which will come in the first year.

What was the reason Centrum showed interest in acquiring PMC Bank? Was banking always on the agenda of the group?

From the time I came into Centrum, the plan was to eventually end up as a bank.

This was an opportunity we sensed during Covid times. So we said we must look at it.

The main advantage for having a SFB license is to be able to build a deposit franchise.

Because as you have seen the experience of NBFCs, to get credit has not been easy.

So we felt that having a deposit franchise is quite important in today's environment. That is, kind of, one of the main factors.

Centrum Financial Services Ltd is a part of the Centrum Capital which is the holding company. What are the other companies in the group?

Centrum Capital is the holding company of the group. Centrum Financial services is the NBFC which does MSME business.

We have three NBFCs. One NBFC which does affordable housing.

Another does micro finance. The MSME one has got the license. Centrum Financial's loan book is Rs 1,000 crore (Rs 10 billion) as on March 31, 2021.

The NBFC which does MSME business -- Centrum Financial -- will be converted into a Small Finance Bank. Will the other NBFCs continue to operate on a standalone basis?

Yes. That is right.

What is the next step for Centrum Financial? When do you see PMC Bank restarting operations?

We have been given 120 days time by the RBI, to be in a position to operationalise the bank.

We will try to meet that deadline and get that done. Once we are operating as a bank, at the end of four months, then RBI will draft a scheme of amalgamation for PMC.

That scheme will have to go to the Government of India for approval.

Once they approve it, it will be open to the public for comments.

Once the comments come in, then the RBI and the Government of India has to review it, to check whether they want to change anything in the scheme or not, depending on the comments, and post that once they finalise between both of them, then it will go into the gazette.

Once it is notified, then the actual transaction will take place.

The process is the same as the revival of Yes Bank and Lakshmi Vilas Bank...

The advantage of LVB and Yes Bank was that both parties were banks.

Whereas here because we are an NBFC, we cannot do a merger between a bank and NBFC.

It has to be bank to bank. So that is why we have to first be operational as a bank and then only we can do.

Otherwise, it would have happened simultaneously.

What will be the name of the new entity?

We have not yet finalised. We are working on it...

Will both Centrum and Bharat Pe feature in the name?

We don't know, we could do that as well or we could go for a generic name.

Will Centrum and Bharat Pe will be jointly the promoter of the new bank?

RBI does not allow joint promoters. Centrum will be the only promoter. But they will be equal partners.

So, will it be a 50:50 stake?

Yes. Correct.

Then Centrum has to give a roadmap to RBI to reduce the promoter stake?

Yes, we will have to work as per the guidelines.

Do you want to raise capital for the bank?

For the bank we do not need it. Right now we have committed Rs 1,800 crore for the SFB as compared to Rs 200 crore (Rs 2 billion) which is the requirement (as per RBI norms for an SFB).

If we want to make an acquisition for something, then we can raise it otherwise.

But for the organic growth of the bank, we have provided for sufficient capital.

Of the Rs 1,800 crore, Rs 900 crore will come in the very first year and the balance, we said as and when required we are committed to bring the remaining as well.

Are you saying, Rs 900 crore capital of SFB will be sufficient to digest PMC Bank?

I don't want to say anything. But yes, that is why we have brought in more capital.

What will be the roadmap for the small finance bank? Do you see it having a pan India presence?

It will be a pan India bank. Already the business that Centrum and Bharat Pe does is widely spread geographically.

We will continue to do both business, we will have new business lines as well.

We will be a pan India bank, but we will be almost entirely digital -- 80-90% of the bank will be digital.

We don't need to be physically pan India, but definitely our reach will be pan India.

Do you see the SFB converting into a universal bank going ahead?

Obviously, that is definitely on the cards.

There is a necessary waiting period for that. So we will wait for that and get in the queue to apply.

What will be your message to the PMC Bank depositors who faced a lot of hardship in the last 21 months?

As and when the amalgamation happens, we will give them comfort and assurance. Once the scheme is out, we will tell them we will live up to the scheme, make sure that they get justice in terms of the scheme.

But today we cannot say anything because we are not in a position... the scheme is unknown to us and they are not a part of our company yet.

Only when we are part of the same family, which will happen down the line, then, of course, we will give them all the assurance and the comfort.