PMC Bank's branches begin functioning as Unity SFB outfit from Tuesday: RBI

Unity SFB, which is a 51:49 joint venture between the Centrum Group and Bharat Pe, is making necessary arrangements to implement the provisions of the scheme of amalgamation, says RBI

The branches of beleaguered Punjab and Maharashtra Cooperative Bank (PMC) began functioning as branches of Unity Small Finance Bank (Unity SFB) from Tuesday.

The Government of India on Tuesday notified the scheme of amalgamation of PMC Bank with Unity Small Finance Bank.

Reserve Bank of India, in a statement, said, “The scheme of amalgamation notified today (January 25, 2022) envisages takeover of the assets and liabilities of PMC Bank, including deposits, by the Unity Small Finance Bank in terms of the provisions of the scheme”. It had 137 branches as of March 2019.

Unity SFB, which is a 51:49 joint venture between the Centrum Group and Bharat Pe, is making necessary arrangements to implement the provisions of the scheme, RBI said.

Unity SFB started its operations in November last year after receiving a final nod from the central bank. The promoters of Unity Small Finance Bank along with the joint investor have infused a capital of Rs 1,105.10 crore in Unity Small Finance Bank as on November 1, 2021.

Further, equity warrants of Rs 1,900 crore, to be exercised anytime within a total period of eight years, have been issued by Unity SFB on November 1, 2021 to the promoters to bring further capital.

According to amalgamation scheme, the transferee bank (Unity SFB) shall have the option of merging branches of transferor bank (PMC Bank) according to its convenience and may close down or shift the existing branches, as per the extant instructions issued by the Reserve Bank.

In September 2019, the RBI had superseded the board of PMC Bank and placed it under regulatory restrictions, including cap on withdrawals by its customers, after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL.

According to the amalgamation allowed quick relief to depositors with savings of up to Rs five lakh, but a long wait for those who had more than Rs 5 lakh as deposits with bank. Around 96 per cent, or 880,000 of 924,000, depositors will get their full money straightaway after PMC is merged with Unity SFB.

According to the scheme, retail investors may get up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) instantly, and then some more in phases till they can recall their full deposits after 10 years. However, they will not get any interest accrued on their deposits for five years after March 31, 2021.

Afterwards, a simple interest at the rate of 2.75 per cent. per annum will be paid at the end of each year for the amounts remaining outstanding which shall be payable from the date after five years from the appointed date.

The scheme suggests deposits up to Rs 5 lakh will be returned now, another Rs 50,000 after two years. Another Rs 1 lakh (total Rs 6.5 lakh) withdrawal is allowed after three years, and another Rs 3 lakh after four years (Rs 9.5 lakh); then another Rs 5.5 lakh after five years. In total, depositors with deposits up to Rs 15 lakh will get the entire money after five years.

PMC bank had total deposits of Rs 10,727.12 crore, total advances of Rs 4,472.78 crore and gross NPA of Rs 3,518.89 crore as of March 31, 2020. The troubled multi-state co-operative bank has 924,345 depositors, of which, 20,645 depositors have deposits of more than Rs 10 lakh. The amount stuck is Rs 7,126 crore, which is 60 per cent of the total Rs 11,800-crore in deposits.

Unity SFB has appointed Vinod Rai, the former comptroller and auditor general of India, as chairman of Unity SFB.

Apart from Rai, the SFB has appointed Sandip Ghose, an RBI veteran, Basant Seth, the former chairman and managing director of erstwhile Syndicate Bank, and Subhash Kutte, former chairman RBL Bank to its board to guide its journey in becoming a successful digital bank.