All retail depositors with more than Rs 15 lakh in the scam-hit Punjab and Maharashtra Cooperative (PMC) Bank will have to wait for 10 years to get all their money back. However, deposits up to Rs 5 lakh, which are insured by the Deposit Insurance and Credit Guarantee Corp. (DICGC), will be repaid earlier, as soon as the corporation releases the funds.
The details were mentioned in the Reserve Bank of India’s (RBI’s) draft scheme of amalgamation of PMC Bank with the newly formed Unity Small Finance Bank Ltd (USFB).
“The draft scheme of amalgamation published today (Monday) envisages takeover of the assets and liabilities of PMC Bank, including deposits, by Unity Small Finance Bank in terms of the provisions of the scheme, giving a greater degree of protection for the depositors,” the apex bank said.
PMC had deposits of Rs 10,535.45 crore at the end of March this year, as per the data mentioned on the bank’s website.
Under the scheme, depositors will get their full amount back over a period of 10 years. In the first phase, the bank will pay the amount insured under DICGC of up to Rs 5 lakh to the depositors. The scheme mentions depositors can claim up to Rs 50,000 at the end of three years, Rs 1 lakh at the end of four years, Rs 3 lakh at the end of five years and Rs 5.50 lakh at the end of 10 years.
As regards institutional investors, the RBI has mentioned that 80 per cent of their uninsured deposits will be converted into perpetual non-cumulative preference shares (PNCPS) of USFB with dividend of one per cent per annum payable annually.
After 10 years from the appointed date, USFB may consider additional benefits for such PNCPS holders either in the form of providing a step-up in coupon rate or a call option, upon receipt of approval from the RBI.
The central bank also said that the remaining 20 per cent amount of the institutional deposits will be converted into equity warrants of small finance bank at a price of Re 1 per warrant. These warrants will be converted into shares whenever USFB floats a public issue. For retail investors, interest at the rate of 2.75% will be paid on deposits that are outstanding after five years from the date of notification of the scheme.
“Given the financial condition of the PMC Bank, and in the absence of proposals for capital infusion, the bank was not viable on its own. In that event, the only course of action could have been the cancellation of its licence and taking it for liquidation, wherein depositors would have received payment up to the insurance ceiling of Rs 5 lakh,” the central bank said.
USFB, which has been promoted by Centrum and Bharat Pe, said that 96 per cent of all depositors will get immediate access to their deposits and 99 per cent will get paid in full by the 5th year.
In June, the banking regulator had approved USFB, a joint venture of Centrum Financial Services and Resilient Innovations that runs BharatPe, to take over PMC.
