PMC Bank depositors – IFSCCodeof.in

PMC Bank depositors with over Rs 5 lakh in deposits to get paid over 10 years

November 22, 2021 root Banking & Finance

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The Reserve Bank of India (RBI) on Monday released the draft scheme for the amalgamation of Punjab and Maharashtra Co-operative (PMC) Bank with Unity Small Finance Bank (SFB). The scheme envisages a full payout for depositors with deposits of over Rs 5 lakh over a period of 10 years.

Unity SFB, promoted jointly by Centrum Financial Services and BharatPe owner Resilient Innovation, will have to transfer the amount received from the Deposit Insurance and Credit Guarantee Corporation (DICGC) to all eligible depositors of PMC Bank an amount equal to the balance in their deposit accounts up to Rs 5 lakh, within a 90-day period, as was notified by the DICGC in September.

For depositors who hold more than Rs 5 lakh in deposits, the payout for the additional amount will be made in a staggered manner. Up to Rs 50,000 will be paid over the next two years, up to another Rs 1 lakh after three years, up to Rs 3 lakh after four years, up to Rs 5.5 lakh after five years, and any remaining amount will be paid after 10 years.

After March 31, 2021, no further interest will be payable on the interest-bearing deposits of PMC Bank for a period of five years. In respect of balances in any current account or any other non-interest bearing account, no interest shall be payable to the account holders. Interest will accrue at the rate of 2.75% per annum shall be paid on the retail deposits of PMC Bank, which remain outstanding after the five year-period. This interest will be payable from the date after five years from the appointed date, or the date of notification of the scheme by the government.

As for institutional depositors, 80% of the uninsured deposits outstanding in various accounts to the credit of each institutional depositor of PMC Bank shall be converted into perpetual non-cumulative preference shares (PNCPS) of Unity SFB with a dividend of 1% per annum payable annually. After 10 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 the coupon rate or a call option, after taking the RBI’s approval.

The remaining 20% of the uninsured institutional deposits will be converted into equity warrants of Unity SFB at a price of one rupee per warrant. These equity warrants will further be converted into shares of Unity SFB at the time of the initial public offer (IPO) of the bank. The price for the conversion will be determined at the lower band of the IPO price.

In respect of every other liability of PMC Bank, Unity SFB shall pay only the principal amounts, as and when they fall due, to the creditors in terms of the agreements entered between them prior to the appointed date or the terms and conditions agreed upon.

Unity SFB shall have time up to 20 years from the appointed date to repay the amount received from DICGC towards payment to the insured depositors, which can be done in one installment or in several instalments. “The transferee bank shall create a reserve account in its books and make periodical transfers to it as may be approved by Reserve Bank, for the purpose of discharging its liability towards DICGC in accordance with the provisions of this Scheme,” the draft said.

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‘Business interest not driven by PMC Bank alone’

June 22, 2021 root Banking & Finance

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Jaspal Bindra

The Reserve Bank of India (RBI) may have paved the way for the resolution of PMC Bank by granting an in-principle approval for small finance Bank (SFB) to Centrum Financial Services, but its executive chairman Jaspal Bindra says the business interest was not driven by PMC Bank alone. In an Interview with Ankur Mishra, he says the new bank is going to have all of the Centrum’s NBFC business, a good portion of BharatPe’s business, and PMC will also fold into the bank. He also says PMC Bank depositors will have to wait for clarity till the amalgamation scheme is finalised by the regulator. Excerpts:

What has been the reason for showing interest in PMC Bank?

We looked at it on a standalone basis and thought it (PMC Bank) is resolvable. We basically wanted to find a resolution which was better than liquidation for the lender. Our business interest was not driven by PMC Bank alone. We have looked at it as a bank which will also have PMC as a component. The new bank is going to have all of the Centrum’s NBFC business, a good portion of BharatPe’s business, and PMC will also fold into the bank. The reason for looking for a banking licence was to get a deposit franchise.

What was your proposal for the resolution of PMC Bank?

We are putting in some amount of capital. Now it is for RBI to draft a scheme and the government of India to approve it.

How much capital you are going to put into the new bank?

We have underwritten Rs 1,800 crore between partners (CFS and BharatPe), before we start diluting. Whether we dilute or not, Rs 1,800 crore is underwritten by us, of which Rs 500 crore will be there on Day one. Another Rs400 crore will be there within the first year, and other Rs900 crore will be available on tap from the partners. We will increase it as and when required depending on the growth of the business.

How will the procedure of acquiring PMC Bank work out?

Before we can amalgamate the PMC Bank, we will have to be an operational bank. Under Section 45 of the Banking Regulation Act, one can only prepare a merger scheme between two banks and therefore the process will start only once we have been converted into a bank. So, you need to necessarily become a bank first. Then an amalgamation scheme will be proposed to the government of India and then final notification will come after approvals.

How soon can we see small finance bank shaping up?

Our effort is to do as soon as possible, but there is some procedural time in terms of an EGM has to be called, and we have to incorporate our company. Some of these timelines are beyond our control. However, we are hoping to complete it as soon as possible. It will definitely happen within 120 days timeline.

You would have gone through the latest balance sheet of PMC Bank in detail. What are the immediate pain points and how you are going to deal with it?

In terms of pain points, there is a negative net worth and that is an issue in any financial institution. How I am going to deal with it? I cannot tell, because a lot of it will depend on what gets approved in the amalgamation scheme. So, the biggest pain point is the negative net worth which was created due to poor management and fraudulent transactions in the lending side. Otherwise, the bank was well known for good service. And that is what is really hurting depositors, because their money got misused.

What should PMC Bank depositors expect from new owners What is your intent to deal with depositors?

The intent is to start, we must get to a point which is better than liquidation. How much that will be dependent on the scheme.

Was there any discussion with RBI on PMC depositors?

Till this time, the clock was on standstill for PMC Bank depositors, and now at least the clock has started. Now, the question for depositors is when and how much they will be able to withdraw? I think after getting the licence we will be in position to discuss it with RBI.

How will you control PMC depositors moving out of the bank? What is the strategy there?

We will not want to stop PMC depositors. However, we will convince them that there is a new management and a new set-up. We will be able to manage things better. We will try that to an extent that is possible. However, one of the reasons we have been given licence is that if somebody calls for money, we will have to pay.

Is there any incentive you have planned for the depositors?

Over the next four months, we will be giving a thought to these kinds of things to create some incentives. Is there a way we can create some financial incentives? We will work on that. SFBs anyway pay higher than the market even today to depositors.

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PMC Plan: BharatPe and CFS will collectively infuse between Rs 500-3,000 crore in SFB

June 20, 2021 root Personal Finance

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“We do not know how much amount existing PMC Bank depositors will be able to withdraw, but we want to allow them withdrawing as much as possible,” he further said.

By Ankur Mishra

Centrum Financial Services and BharatPe, will collectively infuse anywhere between Rs 500-3,000 crore capital in the small finance bank (SFB) as per requirement, according to BharatPe group president Suhail Sameer. In an interaction with FE, he said both the partners have agreed to put an equal amount in the bank which will start with Rs 500 crore capital. He also said a final call on PMC Bank depositors will be taken after the amalgamation scheme is prepared by the regulator.

“One thing was clear in our discussion with RBI that interest of depositors is supreme,” Sameer said. According to him the new owners want to allow PMC depositors to withdraw as much as possible from the bank. “We do not know how much amount existing PMC Bank depositors will be able to withdraw, but we want to allow them withdrawing as much as possible,” he further said.

Without sharing details of exact asset-liability mismatch in PMC Bank, Sameer said they have a plan in mind to tackle the same, which is yet to be approved by the regulator.

In the next 3-4 months, the focus for Centrum-BharatPe will be to make small finance bank (SFB) operational, after Reserve Bank of India (RBI) has granted in principle approval to set up SFB on Friday. Under Section 45 of the Banking Regulation Act one can only prepare a merger scheme between two banks and, therefore, the process will start only once SFB is set up. BharatPe expects to extend its existing relationship with its merchants by offering them savings and current accounts, along with banking and credit services.

“Initially high interest rates on deposits will be our pull factor, but overall we want to offer convenience to our customers,” Sameer said. With the kind of reach BharatPe has, mobilising deposits should not be an issue for our bank, he added.

BharatPe facilitates over Rs 200 crore of loans to its merchant partners every month through its NBFC partners. The company has deployed more than 50,000 point of sales (PoS) machines and enables transactions of more than Rs 900 crore per month on PoS machines. BharatPe has presence in 75 cities in the country.

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The financial condition of PMC Bank continues to be precarious: RBI

May 13, 2021 root Banking & Finance

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The Reserve Bank of India said any generalisation for release of funds to meet ‘financial needs’ of scam-hit Punjab and Maharashtra Co-operative (PMC) Bank’s depositors may not be appropriate and sustainable, owing to the bank’s precarious financial position.

The central bank made the aforementioned observation in its affidavit filed in the Delhi High Court in reply to consumer rights activist Bejon Kumar Misra’s petition.

Also read: Distraught depositors want PMC Bank revived soon

Through the petition, Misra is seeking immediate release of emergency funds to meet financial needs arising out of out-break of second wave of Covid-19 and to declare extension of directions issued to PMC Bank under the Banking Regulation Act 1949 as ultra vires.

In its reply, the central bank said there is no merit in the relief sought by the petitioner for immediate release of emergency funds to meet the financial needs arising out of sudden out-break of second wave of Covid-19, as depositors are already allowed to withdraw up to ₹5 lakh on hardship grounds for treatment of terminal illnesses, including treatment of Covid-19.

The RBI further submitted that to make the process of withdrawal on hardship grounds easier and to avoid delays in sending such recommendation to RBI for approval, the authority for approving the payment under hardship grounds has been delegated to the PMC Bank.

“…it is the duty of PMC Bank to pay hardship amount to the eligible depositors as per directions of RBI and subject to availability of liquidity with PMC Bank,” RBI said.

Takeover/ merger

The RBI submitted that the financial condition of PMC Bank continues to be precarious, with its liquidity position not improving enough to allow much room for enhancement of withdrawal limit.

Further, the bank also needs to maintain bare minimum liquidity to run as a going concern and to make itself viable for prospective investors for takeover/ merger etc. Then the reconstruction of the bank will be feasible, which will be in the interest of larger body of depositors, the central bank said.

Due to precarious financial condition of PMC Bank and on account of significant deposit erosion, serious financial irregularities and mismanagement of affairs of the bank and to protect the interest of the depositors in general and in public interest, RBI had placed PMC Bank under directions vide directive dated September 23, 2019, the affidavit said.

Withdrawal limit

The directions are presently valid up to June 30. The withdrawal limit per depositor is capped at ₹1 lakh.

“It is submitted that all efforts are underway to expedite consultations with the prospective investors who have submitted their final offer, in order to arrive at best possible resolution in the interest of all depositors and other stakeholders of the bank,” the central bank said.

The Centrum Group-BharatPe combine is believed to be the font-runner to takeover PMC Bank.

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