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After literally moving heaven and earth for the last 13 months to find a resolution to scam-hit Punjab and Maharashtra Cooperative (PMC) Bank, the PMC Depositors Forum has now approached its Administrator with a proposal to get the bank merged with either a public sector bank (PSB) or a strong private sector bank in a bid to get access to their hard-earned money.
The forum has liaised with the central bank, Finance Ministry and politicians cutting across party lines, among others, and its members, including many senior citizens, even took to the streets amid the raging Covid-19 pandemic to draw the attention of the authorities to their struggle for survival but to no avail.
Chander Purswani, President, PMC Depositors Forum, observed that it has been more than a year since PMC Bank was put under Directions, but there has been no resolution for the bank.
“It is high time we got a resolution so that all depositors get their hard earned money back.
“Our depositors are under tremendous stress and strain. Already, 80-plus PMC family members have lost their valuable lives. An urgent action will be highly appreciated,” said Purswani in his letter to the Administrator, AK Dixit.
There have been earlier instances of weak urban co-operative banks (UCBs) getting merged with public sector banks: Pune-based Shri Suvarna Sahakari Bank merged with Indian Overseas Bank and Memon Co-operative Bank merged with Bank of Baroda.
Merger proposal
According to the proposal mooted by the Forum, the bank acquiring PMC Bank will not only takeover all the assets and liabilities of the latter, but also get an existing client base of over 9.2 lakh customers spread over branches at strategic locations, thereby improving its revenue opportunities.
The proposal highlighted that the acquiring bank will get the benefit of lower tax on profits due to offset of net loss (of PMC Bank) in its books.
Purswani felt that PMC Bank’s depositors are unlikely to withdraw their deposits once the bank gets merged with a stronger bank.
According to the forum, PMC Bank’s networth is negative at ₹5,875 crore. As per the merger proposal, the expectation is that all institutional investors will convert their deposits aggregating ₹2,500 crore into Innovative Perpetual Debt Instruments.
Further, the acquiring bank will infuse capital amounting to ₹3,500 crore (in lieu of PMC Bank’s assets amounting to ₹1,000 crore; and the acquiring bank could get tax benefit of ₹2,000 crore as per Income Tax provisions, plus Income Tax refunds applicable to PMC Bank).
The forum assessed the total deposits of individual depositors at ₹8,000 crore. Further, the bank’s total liquidity, including SLR (statutory liquidity ratio) investments and CRR (cash reserve ratio) balances with the RBI, at ₹2,700 crore.
Even if half of the funds are withdrawn by individual depositors for contingency, the acquiring bank will still have ₹4,000 crore worth of deposits.
The proposal assumes that the Deposit Insurance and Credit Guarantee Corporation will provide interest free loan of ₹4,500 crore (in lieu of liquidation of receivables from the real estate company due to which PMC Bank got into trouble and its subsidiaries and other receivables of PMC Bank). The balance available for day to day banking business is ₹3,200 crore.
PMC Bank depositors have been suffering untold miseries as they can withdraw only ₹1 lakh (per depositor) of their total balance in their account for the entire 15-month period (up to December 22, 2020) that the bank will be under RBI Directions.
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