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MUMBAI : The aggrieved deposit holders of PMC Bank have objected to the final scheme of amalgamation between PMC Bank and Unity Small Finance Bank approved by the government on Tuesday, and have decided to move courts against the implementation of the scheme.
The PMC bank depositors led by Sahakar Bharati, an umbrella body for cooperative societies founded by RBI board member Satish Marathe, have decided to appeal in the Supreme Court against the scheme.
In a press release on Wednesday, Sahakar Bharati argued that the terms of amalgamation are one-sided and unfair to the depositors.
It also urged the Reserve Bank of India and the government to review the plan, which has proposed a staggered payment to all depositor holders over 10 years, zero-interest payment against these deposits for five years after 31 March 2021 and a minimum interest of 2.75% paid on the unpaid deposits thereafter.
“Sahakar Bharati will take lead along with PMC Depositors/Associations and will Appeal to the Supreme Court to take Su Moto cognizance of the hardships PMC Depositors are facing on account of long Lock-In Period of minimum 10 years and ridiculous low Rates of Interest ranging from 1% to 2.75%," said the release.
The forum has instead demanded that the maximum period of lock-in should be for 5 years for all depositors and a minimum interest of 6% should be paid to all depositors during the lock-in period of 5 years. Deposit Insurance Guarantee Scheme (DICGC) should step in to provide liquidity support to the bank in making full repayments, it said.
In the release, the forum claimed that the stress at PMC Bank was not a usual bank failure but a case of fraud.
Separately, PMC Bank Account Holder Forum, a body of individual and institutional depositors, has decided to move the high court.
“This is our plight that even after the final scheme, it is detrimental for retail depositors too as well as institutional and long term depositors. It is totally against shareholders as it wiped the whole share capital. The entire scheme benefits the SFB as they not only got the license but the whole PMC Bank assets in charity," said Dipika Sahani, coordinator of PMC Bank Account Holder forum.
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. The bank was placed under regulatory restrictions after it was found guilty of hiding and misreporting loans given to real estate developer HDIL.
In June last year, RBI had cleared the decks for its takeover by Centrum Group and payments company BharatPe, and a banking licence was issued to set up a small finance bank in October. Centrum’s micro, small and medium enterprise (MSME), and microfinance businesses shall be merged into the new Unity SFB.
As per the final plan, Unity Small Finance Bank will take over the assets and liabilities of PMC Bank, its branch network and employee base. As of 31 March 2020 PMC Bank had a deposit base of ₹10,727 crore and loans worth ₹4,473 crore.
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.
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 a 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 of 31 March 2021 to buy back these PNCPS at face value on a pro-rata basis.
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