RBI Prepares Scheme For PMC, Unity Small Finance Bank Merger
The Reserve Bank of India is preparing a scheme for PMC and Unity Small Finance Bank. Merger. The Reserve Bank of India has created a draught plan for the merger of PMC Bank with Unity Small Finance Bank.On Monday, the Reserve Bank of India (RBI) released a draught strategy to merge the struggling Punjab and Maharashtra Cooperative Bank (PMC) with Unity Small Finance Bank (USFB). The proposed plan calls for USFB to take over PMC Bank’s assets and liabilities, including deposits, to give greater protection to depositors. By December 10, 2021, the RBI has requested comments or objections on the scheme from depositors, members, and creditors of PMC Bank and USFB.
The plan has been published on the website of the central bank.”USFB is being set up with capital of about 1,100 crore as against a regulatory requirement of 200 crore for setting up a small finance bank under the guidelines for on-tap licencing of small finance banks in the private sector dated December 5, 2019, with provision for further infusion of capital at a later date after amalgamation,” according to the RBI.
On September 23, 2019, Maharashtra-based PMC Bank was placed under business limitations due to fraud, which resulted in a significant drop in the bank’s net worth. The directives were last extended to December 31, 2021, through a directive issued on June 25, 2021.
“Given the PMC Bank’s financial situation and the lack of capital infusion plans, the bank was not viable on its own.” In such a case, the only option would have been to revoke its licence and liquidate the bank, with depositors receiving payments up to the insurance ceiling of $5 lakh, according to the RBI. The central bank claimed the amalgamation programme was launched in the benefit of its depositors, and that it would give them protection.
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