PMC deposit holders to move courts against amalgamation plan
Depositors demanded that the maximum lock-in period be five years and a minimum interest of 6% be paid for this period
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MUMBAI :Aggrieved deposit holders of Punjab and Maharashtra Co-operative Bank have decided to approach the courts against implementing the final scheme of amalgamation between PMC and Unity Small Finance Bank (SFB), approved by the government on Tuesday.
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PMC bank depositors led by Sahakar Bharati, an umbrella body for cooperative societies founded by Reserve Bank of India board member Satish Marathe, have decided to petition the Supreme Court against the scheme.
In a press release on Wednesday, Sahakar Bharati argued that the terms of amalgamation are one-sided and unfair to depositors.
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It also urged the RBI and the government to review the plan, which proposed a staggered payment to all depositors over 10 years, zero-interest payment against deposits for five years after 31 March 2021, and a maximum of 2.75% interest paid on unpaid deposits after that.
“Sahakar Bharati will take the lead, along with PMC depositors/associations, and will appeal to the Supreme Court to take suo moto cognizance of the hardships PMC depositors are facing on account of long lock-in period of a minimum of 10 years and ridiculously low rates of interest ranging from 1% to 2.75%," said the release.
Instead, the body demanded that the maximum lock-in period be five years for all depositors and a minimum interest of 6% be paid to depositors during this period. In addition, the deposit insurance guarantee corporation scheme (DICGC) be invoked to provide liquidity support to the bank to make full repayments.
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It claimed that the stress at PMC Bank was not a usual bank failure but a case of fraud.
Separately, PMC Bank Account Holder Forum, a body of depositors, has decided to move the high court. “This is our plight that even after the final scheme, it is detrimental for retail depositors too as well as institutional and long-term depositors. It is totally against shareholders as it wiped the whole share capital. The entire scheme benefits the SFB as they not only got a licence but the whole PMC Bank assets in charity," said Dipika Sahani, coordinator of PMC Bank Account Holder Forum.
The lender was on the brink of collapse when the banking regulator seized it on 24 September 2019, capped withdrawals and launched a probe into accounting lapses. It was placed under restrictions after it was found guilty of misreporting loans given to developer Housing Development and Infrastructure Ltd (HDIL). According to the final plan, Unity SFB will take over the assets and liabilities of PMC Bank, its branch network and staff. As of 31 March 2020, PMC Bank had a deposit base of ₹10,727 crore and loans worth ₹4,473 crore.
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In June last year, RBI cleared the decks for its takeover by Centrum Group and payments company BharatPe, and a banking licence was issued to set up a small finance bank in October. Centrum’s micro, small and medium enterprise (MSME), and microfinance businesses will be merged with the new Unity SFB.
The payout plan will work out in the following manner: The first payment of ₹5 lakh to all depositors will be made as soon as DICGC transfers the funds. The repayment clock starts ticking Tuesday, the so-called appointed date. At the end of the first, second, third, fourth and fifth years, retail depositors will receive an additional amount of ₹50,000, ₹50,000, ₹1 lakh, ₹2.5 lakh and ₹5.5 lakh, respectively.
Eighty per cent of uninsured deposits outstanding to the credit of each institutional depositor will be converted into perpetual non-cumulative preference shares (PNCPS) of Unity SFB with a dividend of 1% per annum payable annually. At the end of the 10th year, Unity will use net cash recoveries from assets pertaining to HDIL in excess of the principal loans to the group outstanding as of 31 March 2021 to buy back these PNCPS at face value on a pro-rata basis.
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