PMC depositors await merger scheme from RBI

Mumbai: As the deadline for RBI to come up with its scheme of amalgamation for PMC nears, the PMC depositors are in a wait and watch mode to get justice for their deposits in the bank. December 31 is the deadline as the moratorium given by RBI to come out with an amalgamation scheme for scam-hit PMC Bank. The PMC depositors are keenly waiting for the modalities of the scheme before they decide what will be their next plan of action will get over on that particular date.

The RBI is supposed to come out with a solution on the proposed amalgamation of PMC Bank by December 31.

"We have already given our objections and suggestions on the amalgamation scheme to RBI. Now, it was up to the apex bank to take a call on the issue. If the RBI abides by our demand, then it was fine.

If not, then we will have to plan our next course of action which may include knocking the court," said Chander Purswani, PMC Depositors' forum president, in an interaction with Bizz Buzz.

As a matter of fact, the RBI has already issued a licence for Unity Small Finance Bank to the lender. The better way would have been that the RBI would have first announced its scheme before going for declaration of SFB. But, what has happened that RBI has announced that it will come out with the amalgamation plan later whereas it was yet to come out with scheme of amalgamation, quipped another depositor.

In a letter to RBI, PMC Depositors Forum said the draft scheme of amalgamation appears to be beneficial to only Unity Small Finance Bank and pointed out how the tenure of repayment and interest accruals can be made more fair.

The depositors of Punjab and Maharashtra Co-operative (PMC) Bank want their money to be paid within three years even as they have expressed the Reserve Bank of India's draft scheme of amalgamation of the urban co-operative bank with Unity Small Finance Bank (USFB) as being

insensitive to their plight.

They have suggested that the Mumbai-based co-operative bank's corpus stored as reserves with the central bank in the form of cash reserve ratio (CRR) and statutory liquidity ratio (SLR) and other balances can be utilised to pay back their deposit amount.

According to the PMC Bank balance sheet for 2020-21 published on their website, the bank has Rs2,770 crore in reserve ratios like CRR and SLR, secured advances of Rs 1,500 crore, gold loans of Rs 690 crore, DICGC dormant accounts of Rs 760 crore and income tax refund of Rs 500 crore, which together add up to a corpus of Rs 6,220 crore.

In a letter to the RBI, PMC Depositors Forum has asked the central bank to desist from implementing its scheme of amalgamation where the depositors above Rs 5 lakh will be paid in a staggered ten-year period. This appears to be beneficial to only the transferee bank (USFB), the letter states, adding that "30-40 per cent of the overall depositors are senior citizens who face grave uncertainty on receiving their own money".

The forum has suggested immediate settlement of at least 25 per cent of retail depositors having deposits in excess of Rs5 lakh. The Deposit Insurance and Credit Guarantee Corporation (DICGC) will take care of depositors who have savings of up to Rs 5 lakh in the bank.

"This (DICGC) payment shall drastically reduce the demand and time liabilities (DTL) of the transferor, thereby causing a huge surplus balance in the CRR and SLR obligation…USFB should be able to immediately settle at least 25 per cent of retail depositors (in the bracket of greater than 5 lakh) amount on account of reduced DTL consequent to settlement of DICGC. We recommend that the remaining amount be settled in maximum of three years," the letter to the RBI states.

The Reserve Bank should also create provisions for withdrawal of funds for medical emergencies being faced by the depositors on a case-to-case basis, the letter said.

The depositors want the interest accrual to continue at the rates they were operating till date of appointment of USFB. Post that, all interest-bearing deposits of PMC Bank depositors should be atprevailing rates of what USFB is offering to their new customers.

Also, they should be allowed to withdraw their interests after the appointed date of USFB as many of them are senior citizens who run their livelihood on this interest income.

As per the current scheme released by the RBI, the deposits shall not accrue any interest after 31 March 2021 and for a period of five years from the appointed date. Post the five-year period, the RBI has proposed an interest of 2.75 per cent per annum to retail depositors of their outstanding balance amount.

"There is no linked milestone of payment to depositors on recovery of assets, recovery of loans, sale of fixed assets, income tax refund, DICGC Dormant accounts, etc. Solution: RBI needs to further ensure that USFB will not exit and amalgamate with any other bank unless & until each and every depositor is fully paid & settled," the letter said.

"RBI needs to further ensure that USFB will not exit/amalgamate with any other bank unless and until each and every depositor is fully paid and settled," the letter stated.

The draft scheme has not clearly defined small and medium-sized enterprises (SME) while mentioning two other categories of depositors.

The forum wants SME/private limited companies, which are closely held and similar to proprietorship firms, partnership firms and Hindu undivided families (HUF), to be included in the definition of retail investors.

The RBI's draft scheme mentions institutional and retail categories of depositors. Retail depositors have been defined as those who hold deposits in the bank in their individual capacity, either singly or jointly with other individual(s), and include proprietorship firms, partnership firms and HUFs. Institutional depositors are in the form of corporations, companies, societies, association of persons and trusts. They are all other depositors who are not in the retail category.

The RBI's proposed scheme restricts the depositors from moving the courts against the central government, the RBI, the transferee bank or transferor bank.

"This clause attempts at withholding the legal rights of the citizens of India to appeal in the court of law and is unconstitutional," the letter said.

The PMC Depositors Forum has urged the RBI to revisit the clause. "If the final draft of the scheme is in the interest of the depositors and safeguards them from any further hardships none of them would want to exercise this right," it noted.

With the RBI placing PMC Bank under business restrictions on 23 September 2019 on account of fraud, depositors were allowed to withdraw only Rs 1 lakh. The months since then have been catastrophic for them.