In a relief for jittery depositors, all branches of the crisis-hit PMC Bank will now function as the branches of the Unity Small Finance Bank Ltd (USFBL) with the completion of the takeover that also marks the end of a more than two-year long RBI-led revival process.
With the Union government notifying the scheme of amalgamation of the Punjab and Maharashtra Cooperative Bank (PMC Bank) and the USFBL with effect from January 25, the bank's depositors can now withdraw their money in a phased manner or continue to have their accounts with the new entity.
In a not-so-common regulatory move, the RBI, in September 2019, superseded the board of the PMC Bank and imposed various restrictions, including capping withdrawals by customers, after financial irregularities at the lender came to light.
"The amalgamation will come into force with effect from the date of the notification of the scheme i.e. January 25, 2022. All the branches of the PMC Bank will function as branches of the USFBL with effect from this date," the Reserve Bank of India (RBI) said in a release.
The central bank also said the USFBL is making necessary arrangements to implement the provisions of the scheme, which envisages takeover of the assets and liabilities of PMC Bank, including deposits, as per terms of the provisions of the scheme.
USFBL, promoted by Centrum Financial Services along with Resilient Innovation Pvt Ltd as a 'joint investor', was granted a banking licence in October 2021. USFBL started functioning on November 1.
The PMC Bank had 137 branches across six states when the RBI superseded the bank's board in September 2019. Out of the 137 branches, 103 were in Maharashtra.
In respect of every savings bank account or current account or any other deposit account with the PMC Bank, the USFBL will open with itself a corresponding and similar account in the name of the respective holder. It will also credit thereto full amount, including interest accrued till March 31, 2021, as per the scheme of amalgamation notified by the Department of Financial Services under the Ministry of Finance.
Initially, the insurance money received from the DICGC will be paid to all eligible depositors subject to a ceiling of Rs 5 lakh.
Thereafter the retail depositors will be permitted to withdraw additional amounts in a phased manner. They can withdraw Rs 50,000 at the end of first year from the appointed date of the scheme of amalgamation (January 25, 2022) and up to Rs 50,000 at the end of the second year.
The depositors can withdraw up to Rs 1 lakh the end of three years, Rs 2.5 lakh at the end of four years and Rs 5.5 lakh at the end of five years. They can withdraw their entire amount from the bank after 10 years.
All employees of the PMC Bank will continue in service on the same remuneration and terms and conditions of service for a period of three years from the appointed date of the scheme of amalgamation.
The USFBL will have the option of merging branches of the PMC Bank according to its convenience and can also close down or shift the existing branches as per the extant instructions issued by the RBI.
In November last year when the RBI had floated the draft scheme of amalgamation, USFBL had said the draft scheme "provides much needed relief and clarity to over 1,100 PMC Bank employees, who will remain employed and continue uninterrupted service to clients".
The promoters of USFBL along with the joint investor have infused a capital of Rs 1,105.10 crore in USFBL as on November 1, 2021.
Further, equity warrants of Rs 1,900 crore, to be exercised anytime within a total period of eight years by the holders thereof, was issued by USFBL on November 1, 2021 to the promoters to bring further capital.
The RBI had superseded the PMC Bank's board after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL. The bank's exposure to HDIL was over Rs 6,500 crore or 73 per cent of its total loan book size of Rs 8,880 crore as on September 19, 2019.