Unity Small Finance Bank (USFB), the 51:49 joint venture between Centrum Group and payments app Bharatpe, on Thursday said it will repay the full principal amount due to all Punjab and Maharashtra Cooperative (PMC) Bank depositors, as per the scheme of amalgamation.

This comes after Sahakar Bharati, an umbrella body for cooperative societies founded by RBI board member Satish Marathe, announced that it would file a petition in the Supreme Court against implementing the final scheme of amalgamation between PMC Bank and Unity Small Finance Bank.

"96 percent of depositors, have deposits up to Rs 5 lakhs, will be paid upfront (subject to completion of the requirements as per DICGC rules). These depositors can choose to either withdraw or retain this amount with Unity Bank; or make additional deposits, and take advantage of the attractive interest rate up to 7%, being offered on savings accounts," the bank said in a press release.

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The lender said institutional depositors will receive preference shares (80%) and equity share warrants (20%) in lieu of their eligible deposit balances. The warrants will be converted into equity shares at the time of the bank's IPO, giving them a potential equity upside.

"Our shareholders have committed capital of over Rs 3,000 crores through cash and warrants, which will be utilized to build a strong foundation for the Bank, hire the right talent and bring best in class technology to deliver a seamless digital banking experience. We are committed to building new-age banking products, catering to a diverse set of customers and businesses," the bank said.

Further, it said, "The ministry of finance, through a gazette notification issued on January 25, 2022, has sanctioned and notified the amalgamation scheme of Punjab & Maharashtra Co-operative Bank Limited (PMC Bank) with Unity Small Finance Bank Limited (Unity Bank), protecting it from liquidation and bringing relief to all stakeholders.

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PMC Bank’s approximately 110 branches and over 1,100 employees will operate as Unity Bank, providing security and stability in their employment along with offering uninterrupted service to clients."

The bank also thanked the Reserve Bank of India (RBI), the ministry of finance, and the DICGC for their prompt support towards the amalgamation, "For the convenience of all depositors, step-by-step instructions to provide access to their accounts will be detailed on the Bank’s website – www.theunitybank.com."

This week, the RBI said the central government had approved the proposed merger of PMC Bank with USFB. The RBI had in December extended the restrictions on PMC Bank for another three months till the end of March 2022 as all necessary process on the draft scheme for the takeover was not complete.

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In September 2019, the RBI had superseded the board of PMC Bank and placed it under regulatory restrictions, including putting a cap on withdrawals by its customers, after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL.

The restrictions have been extended several times since then. The directions were last extended in June this year and are in place till December 31.

The draft scheme of amalgamation envisages a takeover of the assets and liabilities of PMC Bank, including deposits, by USFB, thus giving a greater degree of protection for the depositors, the RBI had said in November last year.

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USFB has been set up with a capital of about Rs 1,100 crore as against the regulatory requirement of Rs 200 crore for the setting up a small finance bank. The scheme notes that equity warrants of Rs 1,900 crore, to be exercised anytime within a total period of eight years, have been issued by USFB on November 1, 2021, to the promoters to bring further capital.

Under the scheme of the arrangement, the depositors will get their full amount back over a period of 10 years. In the initial phase, the bank will pay the amount insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) of up to Rs 5 lakh to depositors.

It is to be noted that USFB, a joint venture between Centrum Group and Bharatpe, has commenced operations as a small finance bank with effect from November 1, 2021.

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(Edited by : Jomy Jos Pullokaran)

First Published:Jan 27, 2022 5:23 PM IST