RBI to work on PMC Bank resolution 'very quickly', says Governor Shaktikanta Das

The RBI crackdown on co-operative banks continues in 2021 as well. [Representational Image]

The Reserve Bank of India will act “very quickly” on the Punjab and Maharashtra Cooperative Bank resolution once it receives the feedback on the draft amalgamation scheme with Unity Small Finance Bank, governor Shaktikanta Das said on December 8.

The RBI has given the stakeholders time till December 10 for comments on the amalgamation proposal.  After examining the feedback, the draft would be sent to the government for the final approval, Das told media as he shared the outcome of the monetary policy committee meeting.

The RBI has on November 22 placed in public domain a draft scheme for the amalgamation of Punjab and Maharashtra Cooperative (PMC) Bank and Unity Small Finance Bank (USFB).

The draft proposes takeover of the assets and liabilities, including deposits, of PMC Bank by USFB in terms of the provisions of the scheme, giving a greater degree of protection for depositors.

The depositors will get their money back over a period of three to 10 years, according to the draft scheme.

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The acquiring bank will pay the amount guaranteed by DICGC of up to Rs 5 lakh to depositors, the draft says. For the remaining amount, the bank will pay up to Rs 50,000 above the payment already made at the end of two years, will pay up to Rs 1 lakh at the end of three years, Rs 3 lakh at the end of four years, Rs 5.5 lakhs at the end five years and the entire remaining amount will be paid after 10 years.

The interest on any of the interest-bearing deposits with the transferor bank (PMC Bank) shall not accrue after March 31, 2021, the RBI said.

"No further interest will be payable on the interest bearing deposits of transferor bank for a period of five years from the appointed date. In respect of balances in any current account or any other non-interest bearing account, no interest shall be payable to the account holders,” the draft has said.

Also read: Analysis | An unfair wait for some PMC Bank depositors?

For institutional depositors, on and from the appointed date, 80 percent of the uninsured deposits outstanding will be converted into Perpetual Non-Cumulative Preference Shares (PNCPS) with dividend of one percent payable annually.

“After ten years from the appointed date, the transferee bank 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 Reserve Bank,” the scheme proposes.

All employees of PMC Bank will continue in service on the same remuneration and terms and conditions for a period of three years from the appointed date, the scheme has said.

PMC Bank was placed under business restrictions with from the close of business on September 23, 2019 and the RBI superseded the bank’s board on account of fraud, which led to steep deterioration in the net worth of the bank.

The bank was allegedly running fraudulent transactions for several years to facilitate lending to HDIL through fictitious accounts and violating single-party lending rules.

About 70 percent of its total loan book of Rs 8,383 crore as on March 31, 2019, had been taken by real estate firm HDIL.

As on March 31, 2020, PMC Bank had total deposits of Rs 10,727.12 crore, total advances of Rs 4,472.78 crore and gross NPA of Rs 3,518.89 crore.

The share capital of the bank stood at Rs 292.94 crore. The bank registered a net loss of Rs 6,835 crore in 2019-20 and reached a negative net worth of Rs 5,850.61 crore.

The RBI on June 18, 2021 said it has decided to grant an in-principle approval to Centrum Financial Services to set up a small finance bank.

“This in-principle approval has been accorded in specific pursuance to Centrum Financial Services Limited’s offer dated February 1, 2021, in response to the Expression of Interest notification dated November 3, 2020, published by the Punjab & Maharashtra Co-operative Bank Ltd, Mumbai,” the RBI said.