PMC Bank depositors of above Rs 5 lakh will get back their full amount but over a period of 10 years, as per the Reserve Bank of India’s (RBI) draft scheme for the takeover of the troubled urban co-operative bank.

The RBI, which Monday announced a draft amalgamation scheme of the Punjab and Maharashtra Cooperative (PMC) Bank with Unity Small Finance Bank Ltd. (USFB), said that the depositors will in the initial phase get paid by the bank the amount insured under DICGC of up to Rs 5 lakh.

According to the draft proposal, USFB will take over the assets and liabilities of the troubled PMC Bank including deposits, thus giving a greater degree of protection for the depositors.

PMC Bank’s high-value depositors would have preferred immediate withdrawal option rather than be forcefully locked in for a longer period. The draft proposal has chalked out a stage-wise withdrawal. The bank will, at the end of two years, pay up to Rs 50,000, and up to Rs 1 lakh at the end of three years. Then Rs 3 lakh will get paid at the end of four years, Rs 5.5 lakh at the end five years and the full amount after ten years.

RBI said the interest on any of the interest bearing deposits with the bank will not accrue after March 31, 2021.

No further interest will be payable on the interest bearing deposits of 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, the draft scheme noted.

“We have to wait longer. We also have to make sacrifices on our interest rates,” a high-value depositor said. 

The RBI has invited suggestions on the draft scheme till December 10. A final decision will be taken after that, it said.

USFB 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, the RBI stated.

Further, the scheme notes that equity warrants of Rs 1,900 crore, to be exercised anytime within a total period of 8 years, have been issued by USFB on 1 November, 2021 to the promoters to bring further capital.

For institutional depositors, on and from the appointed date, 80% of the uninsured deposits outstanding is proposed to be converted into Perpetual Non-Cumulative Preference Shares (PNCPS), with dividend of 1% per annum payable annually.

“After ten 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 coupon rate or a call option, upon receipt of approval from the Reserve Bank,” the draft scheme said.

As per the scheme, all the employees of the transferor bank will continue in service on the same remuneration and terms and conditions of service for a period of three years from the appointed date.

“Given the financial condition of the PMC Bank and in the absence of proposals for capital infusion, the bank was not viable on its own. In that event, the only course of action could have been cancellation of its licence and taking it for liquidation, wherein depositors would have received payment up to the insurance ceiling of Rs 5 lakh,” the RBI said.

Keeping in mind the interest of its depositors, the amalgamation scheme has been unveiled, which would provide them protection, the central bank said.

Mumbai-headquartered PMC Bank was placed under the RBI-imposed business restrictions on September 23, 2019, on account of fraud, which led to severe deterioration in the net worth of the bank. The RBI superseded the bank’s board on account of all this.

On November 1, 2021, USFB, a joint venture between Centrum Group and Bharatpe, commenced operations as a small finance bank.