In the past week, some of you asked us, “Finshots, can you please tell me what’s actually happening at BharatPe?” Now everyone, and we mean literally everyone has covered the story, so what more can we possibly write?

So we thought about it and thought about it some more, and well, we just might have something that’s reasonably interesting. So read on!


The Story

“…please put my Rs 4,000 crore on the table and take the key away from me.”

That’s what Ashneer Grover said in an interview with Moneycontrol last week.

If you haven't been keeping up with all the latest developments in the world of fintech and reality television, we owe you an explanation. So, here’s a short draft (less than 250 words), explaining what this means.

In December 2021, the global reality TV show Shark Tank debuted in India. It’s a show where entrepreneurs pitch their business idea to investors (also called sharks) in a bid to raise money. The show has been a raging hit so far and it’s caught the imagination of the Indian public. And naturally, the people featured on the show have also been in the limelight. But none more so than Ashneer Grover, the individual we quoted earlier.

Ashneer Grover happens to be a shark on the show and he’s also the MD and co-founder of fintech firm BharatPe. Needless to say with Shark Tank’s success, Grover became a household name. But bad publicity soon followed him like a homing missile! It all began with a leaked audio clip — where Grover is allegedly heard berating a bank employee. Then came reports of toxic work culture at BharatPe. Soon Grover went on paid leave. It should have quelled things. But that didn’t happen. Instead, there were allegations that Grover and his wife were involved in financial irregularities at the firm. The firm ordered an audit. Reports suggested that Grover could be asked to leave — permanently. And in response, Grover hired a bunch of lawyers to fight on his behalf and gave a bombastic interview to Moneycontrol a few days ago. In which he boldly claimed that anybody who intended to kick him out of the company had to pay ₹4,000 crores — which he believes is what his shares are worth.

Phew, we made it in 250 words!

Are we all up to speed now? Perfect!

Now amidst this brouhaha, something else is simmering in the background. Something that could have an impact on events that transpired in 2019.

If you’ve watched a few episodes of Shark Tank so far, you’ll probably have seen the other sharks joke about Grover’s endless supply of money because he owns a bank. But wait a minute…BharatPe is many things — it’s a supplier of QR codes, it’s a Buy Now Pay Later (BNPL) company, it’s a Peer-to-Peer (P2P) lending platform. But is it a bank?

Well, yes and no!

Confused? Okay, hear us out.

In June 2021, something big happened. After 6 years, the Reserve Bank of India finally issued a new banking licence. And the lucky winner? None other than BharatPe. The then barely 3-year old payments startup had applied for the licence along with the bigger and better known Centrum Financial Services. It was a joint-venture and they called it Unity. Now the licence didn’t allow the company to operate a full-fledged bank like HDFC or ICICI. Instead, it let them operate a Small Finance Bank (SFB). What’s the difference? Let’s just say that SFBs were meant to target the underserved regions in India. But they can take deposits and pretty much lend at will. So in every sense, it is indeed a banking licence.

But, there’s something else you should know. This license came with some caveats. Remember Punjab and Maharashtra Cooperative (PMC) Bank? Well, this was the cooperative bank that blew up rather spectacularly in 2019. Fake accounts, bad loans — everything was rotten. The RBI had to step in and impose harsh restrictions — on the kind of money people could withdraw from their accounts, and how the bank could function. Unfortunately, the ordinary folks got the short end of the stick as they found out they couldn’t access their deposits.

So, in exchange for the banking licence, RBI asked Unity Bank to merge with PMC and clean up the mess. They had to pay back depositors who were caught in a lurch. Everyone shook hands, and the license was due any time now.

But there’s a bit of a problem here. You see, the RBI also has a rule about who can actually own and run a bank. RBI wants the owner to be “fit and proper”. Now, what does that mean, you ask? Well, here’s an excerpt from an RBI notification explaining this bit.

“Track record and integrity — The candidate should not be under adverse notice of any regulatory or supervisory authority/agency, or law enforcement agency and should not be a defaulter of any lending institution.”

And according to some experts, the corporate governance issues and Ashneer’s conduct could force RBI to play the “fit and proper” card and pull the plug on the merger. If it does, deposit holders in PMC Bank could suffer in tandem.

Or maybe it won’t come to that. Remember when we said earlier that BharatPe wasn’t quite a bank?

Well, we said that because the small finance bank license was granted in favour of the primary applicant. And that was Centrum, not BharatPe. Also, Centrum controls 51% of Unity Small Finance Bank. And Grover isn’t even a Director at this new bank. So, maybe, RBI will look the other way here.

Bottom line — The Ashneer Grover controversy has implications for many stakeholders in the ecosystem and we will have to wait and see how things pan out.

Until then…

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