The distress time for depositors of Punjab and Maharashtra Cooperative (PMC) Bank will at least continue until the year-end as the Reserve Bank of India has extended the restrictions on the scam-hit bank from 1 July to 31 December 2021.

The RBI has extended the directions taking into consideration the time required for Centrum Financial Services to complete the takeover of PMC Bank.

For the depositors, what this effectively means is that they will continue to be under the deposit withdrawal cap imposed by the RBI till such time that PMC Bank gets reconstructed by its new buyers.

The RBI on Friday said that after careful consideration, the proposal from Centrum Financial Services Ltd (CFSL) along with Resilient Innovation Pvt Ltd (BharatPe) has been found to be prima facie feasible.

“Taking into account the time required for completion of various activities involved in the process… the validity of the … Directive dated 23 September 2019, as modified from time to time, has been extended for a further period from 1 July 2021 to 31 December 2021, subject to review,” the RBI said in a notification.

Last week, the RBI granted in-principle approval to Centrum Financial Services, the NBFC arm of Centrum group, to set up a small finance bank. BharatPe, a fintech company, will be a stake partner in the small finance bank. Assets and liabilities of the crisis-ridden PMC Bank will be transferred to the SFB.

PMC Bank depositors will not get their dues immediately. Centrum and BharatPe will first set up the SFB within 120 days. The RBI will then prepare a draft proposal for the merger of PMC Bank.

After the bank’s financial irregularities and lending malpractices came to light, the RBI had imposed withdrawal limitations on depositors. The current withdrawal limit is Rs 1 lakh per depositor. This was initially capped by the RBI at Rs 1,000 to stem the flight of deposits. The new management will have to put the interest of depositors in their top priority list.

Centrum Group along with three-year-old QR code-based payment app Bharat Pe had submitted a joint expression of interest (EoI) to the RBI to collectively acquire PMC Bank.

As of 31 March 2020, PMC Bank's total deposits stood at Rs 10,727.12 crore and advances at Rs 4,472.78 crore. The bank reported a net loss of Rs 6,835 crore and has a negative net worth of Rs 5,850.61 crore. The gross NPA stood at Rs 3,518.89 crore.