RBI floats draft scheme for amalgamation of PMC Bank

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Tribune News Service

New Delhi, November 22

The Reserve Bank of India (RBI) on Monday revealed a draft scheme for amalgamating the Punjab and Maharashtra Cooperative (PMC) Bank with the Delhi-based Unity Small Finance Bank Ltd. (USFB). The PMC Bank was placed under the RBI’s watch after fraud led to a steep deterioration in its net worth.

No other viable option

• The draft scheme envisages takeover of the assets and liabilities of PMC Bank, including deposits, by Delhi-based Unity Small Finance Bank Limited
• The merger is necessitated as given the PMC Bank’s financial condition and in the absence of proposals for capital infusion, it is not viable on its own
• Suggestions and objections to the draft scheme are open till December 10

The merger is necessitated as given the PMC Bank’s financial condition and in the absence of proposals for capital infusion, it is 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. But that would have meant that customers would have received a maximum of Rs 5 lakh for their deposit.

The draft scheme envisages takeover of the assets and liabilities of PMC Bank, including deposits, by the USFB, which was set up with capital of Rs 1,100 crore as against regulatory requirement of Rs 200 crore for setting up of a small finance bank, with provision for further infusion of capital at a future date after amalgamation.

Suggestions and objections to the draft scheme are open till December 10.

The RBI has also warned that co-operative societies cannot use the words “bank”, “banker” or “banking” as part of their names following the amendment of the Banking Regulation Act, which came into force on September 29.

The RBI has also said accepting deposits from non-members by some co-operative societies is tantamount to conducting banking business in violation of the provisions of the Banking Regulation Act.

The RBI said such cooperative societies using the word “bank” have neither been issued any licence nor are they authorised by the RBI for doing banking business. The insurance cover from Deposit Insurance and Credit Guarantee Corporation (DICGC) is also not available for deposits placed with these societies.