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All the branches of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank will function as branches of Unity Small Finance Bank (USFB) with effect from January 25, 2022, according to the Reserve Bank of India (RBI).
This follows the Government of India on Tuesday sanctioning and notifying the Scheme for the amalgamation of PMC Bank with USFB. The appointed date for the amalgamation is January 25, 2022.
PMC Bank’s retail depositors’ with deposits of more than Rs 5 lakh, however, will be disappointed with the provisions of the Scheme.
In their feedback on the draft scheme of amalgamation (issued in November 2021), depositors’wanted the 10-year time period for getting back their deposits reduced to three years and payment of the prevailing rate of interest on their balances with USFB. Both these requests have not been acceded to in the final scheme.
Chander Purswani, President, PMC Depositors’ Forum, said the Forum will examine the feasibility of moving the Court to get justice for the depositors, who have struggled for the past 28 months to get their hard earned money back.
In the timeline for return of deposits back to PMC Bank depositors, an additional payment has been incorporated. At the end of first year from the appointed date, USFB will make an additional payment of up to Rs 50,000 to depositors having balances over Rs 5 lakh.
USFB will initially pay the amount received from Deposit Insurance and Credit Guarantee Corporation to all the eligible depositors of PMC Bank, which would be an amount equal to the balance in their deposit accounts or ₹5 lakh, whichever is less.
Per the scheme, no interest on any of the interest bearing deposits with PMC Bank shall accrue after March 31, 2021 for a period of five years from the appointed date.
Thereafter, simple interest at the rate of 2.75 per cent per annum shall be paid at the end of each year for the amounts remaining outstanding payable from the date after five years from the appointed date.
At the end of the 10th year from the appointed date, USFB will use ‘Net Cash Recoveries’ from assets pertaining to the Housing Development and Infrastructure Ltd (HDIL) Group in excess of the principal amount of advances to the Group outstanding as on March 31, 2021, to buyback Perpetual Non-Cumulative Preference Shares, which will be issued to holders of uninsured deposits as per the Scheme. This will be at face value on a pro rata basis.
The Government’s notification referred to the detection of certain instances of fraud by HDIL and its group companies in PMC Bank in September 2019. The consequent inspections revealed the precarious financial condition, including complete erosion of capital and substantial deposit erosion of that bank.
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