The Road Ahead
Speaking about the depositors of PMC Bank, Bindra said that the scheme of amalgamation filed by RBI will provide clearer details on how the troubled bank’s assets and liabilities will be absorbed by the new small finance bank.
“We are sure that the regulator and the government will introduce a method through which the depositors are not facing any major problems in accessing their money and the bank too does not end up facing problems,” he said.
As part of the rescue plan though, Centrum and BharatPe have not sought any special liquidity assistance from the banking regulator. According to Bindra, the clean set of assets at PMC Bank which will be imported into the small finance bank are only in the range of about Rs 1,000 crore. The liabilities of the cooperative bank are much larger, which will accommodate some deposit outflow without triggering any liquidity concerns at the bank.
As of March 2020, PMC Bank had a loan book of Rs 4,473 crore and a deposit base of Rs 10,727 crore.
For almost two years, depositors of PMC Bank have faced RBI-imposed restrictions on withdrawals owing to the bank’s weak financials and alleged management fraud.
At over RS 6,500 crore, PMC Bank ‘s loans to HDIL exceeded regulatory limits. Moreover, the poor quality of these loans was concealed to present a healthier balancesheet, according to a confession letter by then managing director Joy Thomas. Several top officials are suspected to have been involved in the alleged fraud.
The new small finance bank is unlikely to alter the branch-level staff strength at PMC Bank, Bindra said. For roles which require a more focused skill set, employees of Centrum Group, BharatPe, PMC Bank and candidates from the market will all be considered.
“Nobody at Centrum or BharatPe has been promised a job at the new bank. We will choose whoever is best suited for the job,” Bindra said.
The two biggest challenges facing the small finance bank are time and trust, Bindra said. The timeframe available is short and quick decisions must be made without compromising on quality, he said.
“But when it comes to trust we have to remember that a customer is not going to get excited just because PMC Bank’s ownership has changed. We are not Microsoft. We will have to perform and garner the trust of the existing customer base and the new customers in the future,” Bindra said.