On November 22, 2021, the Reserve Bank of India (RBI) revealed a draft scheme for amalgamating the Punjab and Maharashtra Cooperative (PMC) Bank with the Delhi-based Unity Small Finance Bank Ltd. (USFB).
- The suggestions and objections to the draft scheme are open till December 10, 2021.
Background:
PMC Bank Limited based in Mumbai, Maharashtra, a Multi-State Urban Cooperative Bank, was placed under All-Inclusive Directions under Sub-section (1) of Section 35-A read with Section 56 of the Banking Regulation (BR) Act, 1949 on September 23, 2019 on account of fraud which led to a steep deterioration in its net worth.
Key Points:
i.The draft scheme envisages takeover of the assets and liabilities of PMC Bank, including deposits by USFB.
ii.The merger is required because of the PMC Bank’s financial condition.
iii.Equity warrants of Rs 1,900 crore have been issued by USFB on November 1, 2021 to the promoters to bring further capital. These can be exercised anytime within a total period of 8 years.
PMC Customer’s Amount Arrangement:
Under the scheme, the depositors will get their full amount back over a period of 10 years. In the initial phase, the bank will pay an amount insured under DICGC (Deposit Insurance and Credit Guarantee Corporation) of up to Rs 5 lakhs to depositors.
- Later, at the end of two years, the Bank will pay up to Rs 50,000, and up to Rs 1 lakh at the end of three years, Rs 3 lakhs at the end of four years, Rs 5.5 lakhs at the end five years and the full amount will be paid after ten years.
- The interest on any of the interest bearing deposits with the Bank will not accrue after March 31, 2021.
About Unity Small Finance Bank Ltd. (USFB):
USFB has commenced operations as a small finance bank with effect from November 1, 2021. It is being set up with capital of about Rs 1,100 crore as against regulatory requirement of Rs 200 crore for setting up of a Small Finance bank
- It is a joint venture between Centrum Group and Bharatpe.
- Its registered office is in New Delhi.
Recent Related News:
RBI has imposed a fine of Rs 5 lakh on Kuppam Cooperative Town Bank, Chittoor, Andhra Pradesh, over the violation of provisions of the directions issued by RBI in the Master Circular on Income Recognition, Asset Classification, and Provisioning and Master Circular on Board of Directors for urban co-operative banks.
About Reserve Bank of India (RBI):
Subsidiaries of RBI:
i.Deposit Insurance and Credit Guarantee Corporation of India (DICGC),
ii.Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL),
iii.Reserve Bank Information Technology Private Limited (ReBIT),
iv.Indian Financial Technology and Allied Services (IFTAS),
v.Reserve Bank Innovation Hub (RBIH).