MUMBAI: All retail depositors of Punjab and Maharashtra Cooperative (PMC) Bank will be reimbursed in full over a period of 10 years, although depositors with funds of up to ??5 lakh to the bank would be paid earlier, upon receipt of funds from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The regulator on Monday released PMC Bank’s plan to merge with Unity Small Finance Bank Ltd, which began operations on November 1.
The Reserve Bank of India proposed that after the takeover, while retail depositors until ??5 lakh would be paid upon receipt of funds from DICGC, others would get it in installments, upon request. PMC Bank had total deposits of ??10,535.45 crore as of March 31, 2021, according to data on its website.
âThe draft merger scheme released today (Monday) contemplates the takeover of PMC Bank’s assets and liabilities, including deposits, by Unity Small Finance Bank in terms of provisions of the scheme providing a greater degree of protection to depositors. Said RBI.
For example, after the initial payment of up to ??5 lakh, the next round of payments would be made two years after the date set or the date the central government would notify in the official gazette. After two years, depositors could switch to another ??50,000, bringing the total payment to ??5.5 lakh. Likewise, the next round would be after three years from the date set and the payment at that time would be another ??1 lakh to eligible depositors. After four years and five years, another ??3 lakh and ??5.5 lakh, respectively, would be paid. No repayment is expected for five years and the last payment cycle would take place after 10 years from the date set, for depositors who still have residual funds.
This means that deposits up to ??15 lakh would be paid in installments for five years. For those with deposits greater than that, the remaining money would only come after 10 years from the date set.
PMC Bank, a multi-state cooperative lender, was on the verge of collapse when the regulator seized it on September 24, 2019, capped cash withdrawals and opened an investigation into its accounting failures. In June, RBI cleared its takeover by Centrum and BharatPe and the license was issued last month. The micro, small and medium enterprises (MSMEs) and microfinance enterprises of Centrum will be merged into the bank.
According to the proposal, money deposited by any PMC Bank employee as a staff security deposit, together with interest, up to the appointed date will have to be paid or fully funded if the employee chooses not to continue his or her work. services in the entity.
RBI also said that all deposit accounts transferred to Unity Small Finance Bank (SFB) as part of the merger would also have accrued interest until March 31. âNo further interest will be payable on PMC Bank deposits for a period of five years from the date fixed. Regarding the balances of any checking account or any other non-interest bearing account, no interest will be due to the account holders, âhe said.
However, retail depositors would receive 2.75% interest for funds that remain in circulation even after five years from the date set.
For institutional investors, RBI said 80% of outstanding uninsured deposits will be converted into perpetual non-cumulative preferred shares (PNCPS) of Unity Small Finance Bank with a 1% dividend payable annually. After ten years from the date set, Unity SFB has the option of considering additional benefits for these PNCPS holders, either by increasing the coupon rate or by opting for a call option, if approved by RBI.
The remaining 20% ââof institutional deposits will be converted into Unity SFB stock warrants at the price of Re 1 per warrant. These stock warrants, RBI said, will further be converted into shares of the transferee bank at the time of the initial public offering (IPO) and the price of such conversion will be determined at the lower end of the price of the IPO.
RBI solicited suggestions and objections, if any, from members, depositors and other creditors of PMC Bank and Unity SFB, on the draft scheme by December 10.
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