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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.