Starting on 25 January, PMC Bank branches started operating as Unity SFB branches. This followed the Government of India sanctioning and notifiying a scheme for the amalgamation of PMC Bank with Unity SFB, promoted by a consortium of Centrum Group and BharatPe.
In an interview with Moneycontrol, Centrum Group Chairman Jaspal Bindra said the immediate priority of the SFB is to regain customer trust and get the bank running on a strong technology-driven model. The new management will also try to make liquidity available to PMC depositors when they require it.
Bindra also said the recent controversy over BharatPe founder Ashneer Grover’s conduct with a Kotak executive doesn’t affect the partnership. The controversy forced Grover to go on a leave of absence until March 31. Edited excerpts:
Why did you choose to acquire PMC Bank? Where did you find the opportunity?
Just to keep that long story short, I think we realized that at the stage we were in, there was an imperative to have a bank license. So in our judgment, we felt that the challenge of this transaction, which is the amalgamation with PMC, was worth the license that was being offered alongside and that was really the driving point of our bid.
The depositors’ trust has taken a severe hit because of the events in PMC. How difficult is to gain back this trust?
So, there are two ways to look this. Yes, there are almost 10 lakh depositors who had developed a trust deficit with PMC. So, the first step is to say that we are not PMC Bank. We are Unity, we are a different institution. So, they should feel that they (depositors) now no longer belong to the old institution, but they are part of a new institution, which has definitely a much broader capital base. We are now already Rs 1,100 crore invested plus a commitment of another Rs. 1,900 crores. So, from a capital perspective, it's a very different dimension to the scale. We also come with an A rating already at the start, which hopefully should only get better as things improve, we hope. We believe, and hopefully now the evidence by the RBI (Reserve Bank of India) Fit and Proper (certificate), with a credible promoter, we also come with a deep-pocketed partner.
What are the steps taken to regain customer confidence?
We bring a strong board, to start with. I think we are hoping with all of this like they at least view us differently. Having said that, we will obviously try everything. So, from a financial incentive of creating a savings rate which is 200 basis points more than the rest of the market. On day one, we are trying to make sure that we can carry on, at a minimum, the same level of service that was available to them from PMC because we are retaining the entire team of PMC. And hopefully in the product range we'll be able to act beyond what PMC was able to do and probably in a more sort of convenient way given the use of technology et cetera.
Also Read: BharatPe board united on Ashneer Grover’s issue, reviewing internal governance processes across the business: CEO Suhail Sameer
Where do you want to take the bank? What is the vision for Unity?
For us, size is not everything. We are not driven entirely by size. We would like this to be something. that is you know, best in class in terms of how it is run, how we keep our customers happy. But clearly the growth will be the mantra from where we are starting almost from scratch. So for the first phase, clearly, growth will be the big mantra and we will continue to build on that. But we want to bring – every product and service that we offer—to make available on the App. So it will be a 24x7 service. So I think that is something we want to deliver on. We clearly will have the branch network for people who are more comfortable dealing physically in terms of services and products. But we also, hopefully, given that digital outlay, we will also have probably the national reach from day one, which PMC didn't have; they were more sort of pocketed in a few geographies.
What will be the thrust of your approach?
The driving force is do a few products, do them well. We are not looking at it from a product point of view, we're looking for customer needs that we can meet. And we will start with some of them and then sequentially build on some more and then over time grow to a full suite. But we're not going to start with a full suite, we have to just do a few things, do them well and then get on to the next thing. And then like we do that well as well. So in many ways, roll out will be more like a fintech. But the controls and compliance and the processes will be more like a bank. So it will be a sort of, hopefully, efficient hybrid.
Does the recent events involving Ashneer Grover - your JV partner -worry you?
So, see, I think the way we look at our relationship is institutional with Resilient Innovations Private Limited (RIPL), which is the parent of BharatPe. So from an institutional perspective our relationship is with a foreign company, which is almost entirely owned by big global funds. So we are dealing with the Sequoias and the Tiger Global and the Coatue and Ribbit Capital, etc. So they are really the owners and the partners. Yes, the individual issue that you're talking about is really more of an issue for them, I suspect, than it is for us. Because I don't think so a single shareholder is going to change the partnership dynamics between us.
There were some reports that, you were in some sort of dialogues with the Reserve Bank of India post-this event. Is that true?
No, we had not had the need to speak to RBI on this on this, neither had the RBI.
A section of PMC Bank depositors is still very unhappy because of the long wait. Will Unity compensate these depositors at an earlier date than promised by the scheme? Is there an option like this?
I think the scheme is mandatory on us. I don't think we have flexibility in changing the scheme. But there are other things we can do, which can help the depositors. One of them is we've already announced, which is we are paying savings rate interest at 7%, which is 200 basis points more than the best in the market. We might be able to arrange liquidity for people who have dues in the future, we will go out of our way to help, particularly senior citizens, in that regard. That's the kind of things we can do. But we can't really tamper with the scheme.
I was specifically asking you about the payout part to the PMC Bank depositors, especially senior citizens.
We will try to be helpful. We will try to arrange directly or indirectly, some liquidity for them as and when they need. We will try to work around that. But it's too early I think today's the first day we we've got so over the next few weeks and months we will study, we will have a dialogue with them. We will try to understand where their needs are. And we will definitely, it is in our own selfish interest, to build goodwill with the existing customers. And we feel for the senior citizens so, we will definitely try to put our best foot forward for them.
PMC Bank has a lot of old clients..
Yes, I think, I mean, in terms of the deposit resolution, we will have to follow the scheme. But, obviously, these are existing customers, they have a good track record with PMC Bank... we are going to offer banking services, which if any of them would like to avail, we would give them priority and preference over anyone else.
What is going to be Unity SFB’s specialization as a business proposition which will differentiate you from other small finance banks?
So, I think the – since in our business, it is about meeting needs of the customers, the needs of the customers are the same. So, you can't really differentiate and create a new need and satisfy that. So, we will be meeting those needs. Also, we have already started operating in the MSME (micro, small and medium enterprise) sector. We want to cater to them; we want to cater to the MFI (microfinance institution) sector as well.
PMC was serving the local business community as well...
We obviously want to focus on the PMC clientele... There is a large subsection of senior citizens, there's also a large subsection of business community people in the neighbourhood of the branches, where the branches were, so we will try to cater to them. But over time, we will build auto financing, we will build gold financing. So, in all of that, the PMC clients...will be given preference.
In terms of building the new team, how far have you progressed? Have you completed the near to mid-level hires…
Almost all the CXO positions are filled. And obviously a lot of people below them are getting filled as we speak. One key outstanding position to be filled was the CEO, a full-time CEO. And we have, in the meantime, appointed an interim CEO, but the full-time CEO is something that many conversations are going on, but now that the scheme has been finalized, we will be hopefully able to progress on that at a greater speed...
You are talking about a Rs 3,000 crore of investment. Where all will that money go in the initial phase?
So, it can be a combination. I mean, there will be technology, build of the platform, there will be the distribution, we will have to build it, we'll try to keep it an asset-light model, but still there'll be hubs and spokes across the country, given PMC was only there in two or three states, we are going to have to build much wider across India, there will clearly be – the team that we will build at the centre - will obviously be also another investment. I think we are going to build in the brand, we're going to try to do things differently; even though we do the same things, we'll try to do that differently... hopefully this money will keep us going; it will obviously also be, you know, dictate the size of the balance sheet we can grow, because there is an X amount of leverage we can get on capital. So, we will try to maximize that as well.
You have a strong board with the likes of Vinod Rai…
Yes, we are delighted that he's accepted (the board position as chairman) and the RBI has also approved (it). But, yes, it was very much our desire to bring in somebody of a very high stature in that role, because I think, given the issues PMC has gone through, which are really, complete lack of governance. We wanted to nail governance very clearly. And that is why even today, the bank has been in operation now for almost three months. We are having a pure independent board, there is not even one person who's there who is non-independent.
Over time, yes, we will appoint non-independents also, but a majority will be independent. And we wanted to make that very obvious. Also, the bank will be board-run, we want to be very clear about that. And it's only appropriate to have somebody of the stature of Vinod Rai, who can laser-correct governance foundations. And so we are really happy that that has happened.
Is there anything else you want to highlight about Unity at this point?
I think the rest is largely covered in the press release. So I assume there isn't that much more to say today, but I think every passing day, we will have something or the other to say, but right now, I think this should be it.