The proposed amalgamation of the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank with the newly floated Unity Small Finance Bank could be a test case for the Reserve Bank of India (RBI) regarding its approach towards how individual depositors with deposits up to ₹2 crore and those with deposits of ₹2 crore and above can be dealt with when it comes to withdrawal of money.

The Scheme being put together by the central bank is expected to be placed in public domain in a week or so for suggestions and objections from members, depositors and other creditors of transferor bank (PMC Bank) and transferee bank (Unity SFB).

As per Reserve Bank of India (Interest Rate on Deposits) Directions, 2016, a “Bulk Deposit” means a single Rupee term deposit of ₹2 crore and above for Scheduled Commercial Banks (excluding Regional Rural banks) and Small Finance Banks.

So, a deposit of up to ₹2 crore is considered as a “Retail Deposit”.

The question uppermost on individual depositors’ (under the bulk deposit category) mind is whether the central bank will treat retail deposit and individual bulk deposit on an equal footing vis-a-vis withdrawal.

Phased withdrawal

Chander Purswani, President, PMC Depositors’ Forum, said the Scheme should clearly specify the threshold up to which individual deposits can be freely withdrawn and how deposits beyond this threshold can be withdrawn in a phased manner over, say, 3-5 years.

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Further, interest accrued on individual depositors’ deposits, be it retail or bulk, should be allowed to be withdrawn in toto.

He underscored that PMC Bank depositors have suffered over the last 26 months amid the Covid-19 pandemic as deposit withdrawal has been capped at ₹1 lakh of the total balance in their account(s) during the entire period that their Bank is under RBI’s Directions.

What this means is that depositors, especially senior citizens (who usually depend on interest earnings to meet monthly expenses), had to make do with only ₹3,846 a month over the last 26 months.

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Purswani assessed that after taking into account deposit withdrawals of up to ₹1 lakh, PMC Bank has about 1.42 lakh depositors with deposits of over ₹1 lakh. Of this, there are about 43,000 depositors, including individuals, trusts, cooperative societies, etc, with deposits of over ₹5 lakh.

DICGC, a wholly-owned subsidiary of RBI, had upped the limit of insurance cover for depositors in the insured banks fivefold to ₹5 lakh per depositor with effect from February 4, 2020.

Individual depositors, including those with large deposits, need an assurance that they can systematically withdraw their money from Unity SFB, the Forum’s chief said.

Limited period incentive

He opined that the Scheme could also incorporate a limited period incentive, whereby PMC Bank depositors can earn higher interest rate over the card rate so that they are encouraged to keep the deposits with Unity SFB.

PMC Bank came to grief as its high exposure to real estate company HDIL turned non-performing.

The central bank red-flagged the fraud/financial irregularities in the bank and manipulation of its books of accounts.

Last month, RBI granted banking licence to Unity SFB, which has been established jointly by the Centrum Financial Services Ltd (CFSL) and Resilient Innovations Private Limited (BharatPe), to carry on SFB business in India.

RBI had accorded “in-principle” approval to CFSL, which is a wholly-owned subsidiary of Centrum Capital Ltd, on June 18, 2021, to set up an SFB.

The “in-principle” approval was in specific pursuance to CFSL’s February 2021 offer in response to PMC Bank’s November 2020 Expression of Interest (EoI) notification.

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