Depositors of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank having deposits over ₹5 lakh are disappointed as the draft scheme for amalgamation of their Bank with Unity Small Finance Bank (Unity SFB) envisages the return of their money piecemeal over an extended period of 10 years. Also, what has caused consternation among the depositors is that no further interest will be payable on the interest bearing deposits of PMC Bank for five years from the appointed date.

The appointed date is the date when the undertaking of the transferor bank (PMC Bank) will stand transferred to and vest in the transferee bank (Unity SFB). Unity SFB, which has been jointly established by the Centrum Financial Services Ltd (CFSL) and Resilient Innovations Private Limited (BharatPe) to carry on SFB business in India, was granted a banking licence by RBI on October 13.

As per the scheme, the interest on any of the interest-bearing deposits with PMC Bank shall not accrue after March 31, 2021.

Chander Purswani, President, PMC Depositors Forum, said, “We have been taken for a ride. We are really disappointed with this draft scheme. Since the protection of depositors’ interest is supreme for RBI, it should have ensured that PMC Bank depositors get back their money much earlier than the 10-year extended repayment schedule that has been drawn up.”

Purswani observed that Unity SFB is benefiting at PMC Bank depositors’ expense as the former does not have to pay interest on their deposits for the first five years. PMC Bank depositors, especially senior citizens, have struggled to make ends meet amid the pandemic due to the ₹1 lakh per depositor cap on withdrawal during the entire two-year period their bank has been under RBI directions.

According to the scheme, Unity SFB will pay the amount received from the Deposit Insurance and Credit Guarantee Corporation (DICGC) 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.

Staggered payment

In the case of PMC Bank’s retail depositors with deposits over ₹5 lakh, at the end of two years from the appointed date, Unity SFB will pay an additional amount up to ₹50,000 from the balance remaining in their accounts. Likewise, at the end of three years, four years, five years from the appointed date, Unity SFB will pay an additional amount up to ₹1 lakh, ₹3 lakh, ₹5.50 lakh, respectively, from the balance remaining in PMC Bank retail depositors’ accounts.


So, presuming that most of the depositors have withdrawn ₹1 lakh during the last two years, a retail depositor with ₹14 lakh outstanding balance will be able to withdraw the entire amount over five years. But those with deposits above ₹14 lakh will have to wait longer. As per the scheme, the entire remaining amount of deposits (after the payments over five years) will be paid in the accounts of the retail depositors of PMC Bank after 10 years from the appointed date.

Interest at the rate of 2.75 per cent per annum will be paid on the retail deposits of PMC Bank which are outstanding after the said period of five years from the appointed date. The transferee bank will have time up to 20 years from the appointed date, to repay the amount received from DICGC towards payment to the insured depositors, which can be done in one instalment or several instalments.

Purswani assessed that after taking into account deposit withdrawals of up to ₹1 lakh, PMC Bank has about 1.42 lakh depositors with deposits of over ₹1 lakh. Of this, there are about 43,000 depositors, including individuals, trusts, cooperative societies, etc. with deposits of over ₹5 lakh. The draft scheme envisages conversion of 80 per cent of the uninsured deposits outstanding (aggregate in various accounts) to the credit of each institutional depositor of PMC Bank into Perpetual Non-Cumulative Preference Shares (PNCPS) of Unity SFB with a dividend of one per cent per annum payable annually.

After 10 years from the appointed date, Unity SFB may consider additional benefits for such PNCPS holders either in the form of providing a step up in the coupon rate or a call option, upon receipt of approval from RBI.

The remaining 20 per cent amount of the institutional deposits will be converted into equity warrants of Unity SFB at a price of ₹1 per warrant. These equity warrants will further be converted into equity shares of Unity SFB at the time of the Initial Public Offer (IPO) when the transferee bank goes for public issue. The price for such conversion will be determined at the lower band of the IPO price.

Meanwhile, referring to the draft scheme of amalgamation, Unity SFB, in a statement, said, “96 per cent of all (PMC Bank) depositors will get immediate access to their full deposits, 99 per cent of the retail depositors to be paid in full by 5th year and 100 per cent of retail depositors to be paid in full by 10th year. “...The Draft Scheme provides much needed relief and clarity to over 1,100 PMC Bank employees, who will remain employed and continue uninterrupted service to clients.”