The Reserve Bank of India on November 22 located in public area a draft scheme for amalgamation of Punjab and Maharashtra Cooperative (PMC) Bank and Unity Small Finance Bank (USFB).
The draft envisages takeover of the belongings and liabilities of PMC Bank which includes deposits, with the aid of using USFB in phrases of the provisions of the scheme, giving a more diploma of safety for depositors.
“It can be visible that USFB is being installation with capital of approximately Rs 1,a hundred crore as towards a regulatory requirement of Rs 2 hundred crore for putting in of a small finance financial institution beneathneath the pointers for on-faucet licensing of small finance financial institution in personal zone dated December five, 2019, with provision for in addition infusion of capital at a destiny date after amalgamation,” the RBI stated.
Equity warrants of Rs 1,900 crore, to be exercised whenever inside a duration of 8 years, were issued with the aid of using Unity Small Finance Bank on November 1, 2021 to the promoters to deliver in addition capital, in keeping with the draft scheme.
The RBI has invited tips at the draft scheme until December 10. A very last choice may be taken after that, it stated.
When will PMC Bank depositors get their cash again?
The depositors of Maharashtra-primarily based totally PMC Bank gets their cash again over a duration of 3 to 10 years, in keeping with the draft scheme of amalgamation.
As in keeping with this, the obtaining financial institution can pay the quantity assured with the aid of using DICGC of as much as Rs five lakhs to depositors. For the ultimate quantity, the financial institution can pay as much as Rs50,000 above the price already made on the give up of years, can pay an quantity of as much as Rs one lakh on the give up of 3 years, Rs three lakhs on the give up of 4 years, Rs five.five lakhs on the give up 5 years and the complete ultimate quantity may be paid after ten years.
The hobby on any of the hobby bearing deposits with the transferor financial institution (PMC Bank) shall now no longer accrue after March 31, 2021, the RBI stated.
“No in addition hobby may be payable at the hobby bearing deposits of transferor financial institution for a duration of 5 years from the appointed date. In recognize of balances in any modern-day account or another non-hobby bearing account, no hobby will be payable to the account holders, in keeping with the scheme,’.
For institutional depositors, on and from the appointed date, eighty in keeping with cent of the uninsured deposits extremely good is proposed to be transformed into Perpetual Non-Cumulative Preference Shares (PNCPS) with dividend of 1 in keeping with cent in keeping with annum payable annually.
“After ten years from the appointed date, the transferee financial institution can also additionally don’t forget extra advantages for such PNCPS holders both withinside the shape of supplying a step up in coupon fee or a name option, upon receipt of approval from the Reserve Bank,” the scheme proposes.
Further, all of the personnel of the transferor financial institution will retain in carrier at the identical remuneration and phrases and situations of carrier for a duration of 3 years from the appointed date, the scheme stated.
How it unfolded
Maharashtra-primarily based totally PMC Bank became located beneathneath commercial enterprise regulations with impact from the near of commercial enterprise on September 23, 2019 and the RBI outmoded the financial institution’s board due to fraud, which brought about steep deterioration withinside the internet really well worth of the financial institution.
It became determined that the financial institution were allegedly going for walks fraudulent transactions for numerous years to facilitate lending to HDIL via fictitious debts and violating single-celebration lending rules.
About 70 percentage of its general mortgage ee-e book of Rs 8,383 crore as on March 31, 2019, were taken with the aid of using actual property company HDIL. As on March 31, 2020, PMC Bank had general deposits of Rs 10,727.12 crore, general advances of Rs 4,472.seventy eight crore and gross NPA of Rs three,518.89 crore. The percentage capital of the financial institution stood at Rs 292.ninety four crore. The financial institution registered a internet lack of Rs 6,835 crore in 2019-20 and reached a poor internet really well worth of Rs five,850.sixty one crore.
RBI had on June 18 this yr stated it has determined to provide an in-precept approval to Centrum Financial Services to installation a small finance financial institution. “This in-precept approval has been accorded in precise pursuance to Centrum Financial Services Limited’s provide dated February 1, 2021, in reaction to the Expression of Interest notification dated November three, 2020, posted with the aid of using the Punjab & Maharashtra Co-operative Bank Ltd., Mumbai,” the RBI stated.
The instructions have been closing prolonged via a June 25 directive from the important financial institution as much as December 31, 2021. “Given the economic situation of the PMC Bank and withinside the absence of proposals for capital infusion, the financial institution became now no longer feasible on its own. In that event, the handiest direction of movement might have been cancellation of its licence and taking it for liquidation, in which depositors could have acquired price as much as the coverage ceiling of Rs five lakh,” the RBI stated.