Govt notifies PMC-Unity merger plan, allows staggered deposit repayment
Premium- According to the draft scheme, all retail depositors of PMC Bank will be fully repaid in tranches over 10 years
MUMBAI : Depositors of Punjab and Maharashtra Co-operative Bank Ltd. (PMC Bank) on Tuesday moved a step closer to receiving their dues as the government notified the scheme of amalgamation with Unity Small Finance Bank Ltd, making minor tweaks to the draft scheme of the Reserve Bank of India (RBI).
According to the draft scheme made public on 22 November, all retail depositors of Punjab and Maharashtra Cooperative (PMC) Bank will be fully repaid in tranches over 10 years. While the government has made some changes to payout schedules, the aggregate payout at the end of five years remains ₹15 lakh.
Data on PMC Bank’s website shows it had deposits of ₹10,535.45 crore at the end of March last year.
“The amalgamation will come into force with effect from the date of the notification of the scheme, 25 January 2022. All the branches of the PMC Bank will function as branches of Unity Small Finance Bank Ltd. with effect from this date," RBI said in a statement on its website.
The payout plan will work out like this: The first payment of ₹5 lakh to all depositors will be made as soon DICGC transfers the funds. The repayment clock starts ticking from Tuesday, the so-called appointed date. At the end of the first, second, third, fourth and fifth years, retail depositors will receive additional ₹50,000, ₹50,000, ₹1 lakh, ₹2.5 lakh and ₹5.5 lakh, respectively.
For the next five years, there won’t be any repayments. At the end of the 10th year, those who still have residual amounts with the bank will be repaid in full, on demand.
PMC Bank, a multi-state cooperative lender, was on the brink of collapse when the regulator seized it on 24 September 2019, capped cash withdrawals and launched an investigation into its accounting lapses. In June last year, RBI cleared the decks for its takeover by Centrum and BharatPe, and the licence was issued in October. Centrum’s micro, small and medium enterprise (MSME), and microfinance businesses shall be merged into the new Unity SFB.
“..after detection of certain instances of fraud by Housing Development and Infrastructure Limited and its group companies in the Punjab and Maharashtra Co-operative Bank Limited in September 2019 and the consequent inspections, the precarious financial condition, including complete erosion of capital and substantial deposit erosion of that bank was revealed," the government notification said on Tuesday.
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Meanwhile, 80% of the uninsured deposits outstanding to the credit of each institutional depositor shall be converted into Perpetual Non-Cumulative Preference Shares (PNCPS) of Unity Small Finance Bank with dividend of 1% per annum payable annually. At the end of the 10th year, Unity Small Finance Bank will use net cash recoveries from assets pertaining to Housing Development and Infrastructure Ltd Group in excess of the principal loans to the group outstanding as on 31 March 2021 to buyback these PNCPS at face value on a pro-rata basis.
That apart, all employees of PMC Bank will continue in service on the same remuneration and terms and conditions of service for a period of three years from Tuesday.
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