Unity Small Finance Bank (USFB) has introduced two liquidity options for senior citizen customers of the erstwhile Punjab and Maharashtra Co-operative (PMC) Bank whereby they can either encash the balances in their accounts at a discounted rate or opt for an overdraft facility.

This is aimed at alleviating the liquidity issues that some of the senior citizen depositors (of erstwhile PMC Bank who still have balances in Unity SFB after the deposit insurance payout) are facing.

“Valid till 31st December 2022 or such date as may be decided by the bank, both options are designed to bring relief for medical emergencies, wedding expenses, home renovation, amongst other personal requirements.

“Interested customers are requested to connect with their respective Branch Managers for additional information and detailed terms and conditions,” Unity SFB said in a communication to its customers.

The Bank emphasised that both liquidity options are purely voluntary and customers have the option of continuing with the scheduled payouts as per the Amalgamation Scheme (of PMC Bank with Unity SFB).

The Early Encashment option will provide an upfront, lump sum amount against a depositor’s entire future payables at a discounted rate (Present Value).

This may be best suited for customers who are in need of a large corpus or sizeable amount of funds, Unity SFB said.

Overdraft facility

The Overdraft Facility provides an overdraft as per the depositor’s eligibility. Customers who are in need of a relatively smaller quantum of money may avail of this facility as it is priced at a fair rate of interest, per the communication.

Banking experts say Unity SFB is trying to build goodwill among erstwhile PMC Bank depositors by offering the aforementioned liquidity options so that they and their families place deposits with it.

Term deposits

Among all the term deposit (TD) tenors, the Bank is offering the highest interest rate of 7.50 per cent on TDs in the more than 2 years and up to five year maturity bucket. Senior citizens earn 50 basis points (or 0.5 per cent) higher interest over the card rate.

Savings bank deposits up to ₹1 lakh and above ₹1 lakh and up to ₹10 crore fetch 6 per cent interest and 7 per cent interest, respectively.

While majority of PMC Bank’s retail depositors with balances of up to ₹5 lakh have the received deposit insurance amount, those with balances above this threshold will get their money back in phases over an extended 10 year period from the appointed date (January 25, 2022) of the merger of the urban co-operative bank with Unity SFB.

Under the Amalgamation Scheme, a retail depositor with the erstwhile PMC Bank with a deposit of, say, ₹15 lakh, would have already received the deposit insurance amount of ₹5 lakh.

This depositor will receive the balance amount in phases — ₹50,000 each at the end of the first and second years from the appointed date; ₹1 lakh and ₹2.50 lakh at the end of the third and fourth years, respectively; and finally ₹5.50 lakh at the end of the fifth year. No interest is payable on these deposits during the first five years.

If a depositor still has a balance after the fifth year payout, he/she will receive the same over the next five years. However, simple interest at the rate of 2.75 per cent will be paid at the end of each year after the fifth year from the appointed date.

Chander Purswani, President, PMC Depositors’ Forum, said: “While the move to offer two liquidity options to senior citizen depositors is welcome, the devil is in the detail.

“The Bank needs to clarify the discounted rate (haircut that a depositor may have to take) if a depositor opts for the early encashment option and the “fair rate of interest” in case he/she opts for the overdraft facility.”

Given that the depositors of erstwhile PMC Bank will not earn any interest on their deposits for the first five years from the appointed date, they should carefully weigh the benefits of the two liquidity options being offered by Unity SFB.

The RBI had accorded “in-principle” approval to Centrum Financial Services Ltd (CFSL) on June 18, 2021, to set up a SFB (Unity). This approval was in specific pursuance to CFSL’s February 2021 offer in response to the scam-hit PMC Bank’s November 2020 Expression of Interest (EoI) notification relating to its reconstruction.

Unity SFB has been jointly promoted by CFSB, the small business lending arm of the Centrum Group, and fintech company Resilient Innovations Pvt Ltd (BharatPe).

All the branches of PMC Bank started functioning as branches of Unity SFB with effect from January 25, 2022.

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