RBI releases draft scheme for amalgamation of PMC Bank, Unity Small Finance Bank

The Reserve Bank (RBI) on Monday launched a draft scheme for the amalgamation of Punjab and Maharashtra Cooperative (PMC) Bank and Delhi-based Unity Small Finance Bank (USFB).
Unity Small Finance Bank is a three way partnership between Centrum Group and Bharatpe. It has commenced operations as a small finance financial institution with impact from November 1, 2021.
According to the draft scheme of amalgamation, the takeover of the belongings and liabilities of PMC Bank, together with deposits, by Unity will give a better diploma of safety for the depositors.
“It may be seen that USFB is being set up with capital of about Rs 1,100 crore as against a regulatory requirement of Rs 200 crore for setting up of a small finance bank under the guidelines for on-tap licensing of small finance bank in private sector dated December 5, 2019, with provision for further infusion of capital at a future date after amalgamation,” the RBI scheme mentioned.
The RBI mentioned it could obtain solutions and objections on the draft scheme until 5 pm on December 10, after which it would take a last view on the takeover.
The RBI draft mentioned following the amalgamation, the depositors of PMC will get their a reimbursement over a interval of three to 10 years. It mentioned that the transferee financial institution (Unity) will first make the cost of as much as Rs 5 lakh or much less obtained from DICGC to eligible depositors.
For the remaining quantity, the financial institution can pay as much as Rs 50,000 above the cost already made on the finish of two years, adopted by an quantity of as much as Rs 1 lakh on the finish of three years, Rs 3 lakh on the finish of 4 years and Rs 5.5 lakh on the finish 5 years. The RBI mentioned all the remaining quantity shall be paid after ten years.
The central financial institution mentioned the curiosity on any of the interest-bearing deposits with the transferor (PMC) financial institution shall not accrue after March 31, 2021.
“No further interest will be payable on the interest bearing deposits of the 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,” mentioned the RBI scheme.
The RBI scheme additionally mentioned that for institutional depositors 80 per cent of the uninsured deposits excellent shall be transformed into Perpetual Non-Cumulative Preference Shares (PNCPS) with dividend of 1 per cent each year payable yearly.
“After ten years from the appointed date, the transferee (Unity) 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 remaining 20 per cent amount of the institutional deposits will be converted into equity warrants of transferee bank at a price of Re.1 per warrant. These equity warrants will further be converted into equity shares of the transferee bank at the time of the Initial Public Offer (IPO) when the transferee bank goes for public issue. The price for such conversion will be determined at the lower band of the IPO price,” mentioned the RBI scheme.

According to the proposed amalgamation scheme, all the workers of PMC Bank will proceed in service on the identical remuneration and phrases and situations of service for a interval of three years from the appointed date.
PMC Bank was put underneath regulatory restrictions in 2019 after the RBI discovered monetary irregularities in its functioning, hiding and classification of loans given to Housing Development Infrastructure Ltd (HDIL). The financial institution had an publicity of over Rs 6200 crore to HDIL. The RBI has outmoded the board of the financial institution and appointed an administrator in September 2019.