Five-year interest holiday and final settlement at end of 10 years unfair to depositors
Sahakar Bharati may seek reworking of the draft scheme for the amalgamation of Punjab & Maharashtra Co-operative (PMC) Bank with Unity Small Finance Bank (SFB) — the transferee bank — for a more equitable deal for depositors.
The clause that “no further interest will be payable on the interest-bearing deposits of the transferor bank for five years from the appointed date (of merger) is unfair. Also, depositors will have to wait a decade to be paid in full,” said a top official of the pan-Indian organisation.
A significant force in the country’s co-operatives space, Sahakar Bharati calls itself “an organisation of co-operators and co-operatives”. It had played a key role in giving inputs to the newly minted Ministry of Co-operation.
“We have called for a meeting at the end of this month,” said an official, adding, “The five-year break on servicing interest on deposits amounts to giving free money. This was not the case in YES Bank’s instance.”
In any case, only current accounts of banks are interest-fee, not savings or fixed deposits. End-March, PMC Bank had deposits of Rs 10,535.45 crore. Sources have said that around 50,000 depositors will stand affected by the current scheme.
It was, however, categorically mentioned that Sahakar Bharati is not against the Centrum-BharatPe combine’s interest in PMC Bank. The window for suggestions and objections to the scheme closes on December 10.
Sahakar Bharati’s National General-Secretary Uday Joshi could not be reached for comment.
The contentious clause in RBI’s Amalgamation with Unity SFB Scheme, 2021, for PMC Bank says: “No further interest will be payable on the interest-bearing deposits of the transferor bank for a period of five years from the appointed date. In respect of balances in any current account, or any other non-interest bearing account, no interest shall be payable to account holders, provided further that interest at the rate of 2.75 per cent per annum shall be paid on retail deposits of the transferor bank which shall be remaining outstanding after the said period of five years from the appointed date.
This interest will be payable from the date after five years from the appointed date.”
The flight path for settling with PMC Bank depositors is tranched. Depositors of up to Rs 5 lakh will be paid as soon as the Deposit Insurance and Credit Guarantee Corporation (DICGC) makes a transfer of funds. On conclusion of the second, third, fourth, and fifth years, depositors will receive an additional Rs 50,000, Rs 1 lakh, Rs 3 lakh, and Rs 5.5 lakh, respectively. In effect, depositors of up to Rs 15 lakh will be settled by the end of the fifth year. The tricky part is that for the next five years, they will get nothing. At the end of the 10th year, those with residual amounts are to be repaid in full.
It is pertinent to note that Sahakar Bharati had submitted to the Vishwanathan Committee that “in challenging situations, DICGC should be empowered to veto any decision of the bank which is detrimental to the interests of depositors”. It was for “the formation of a consultative body of stakeholders, including depositors”.
FINE PRINT · 5-year break on servicing depositors amounts to giving free money · 10-year wait for final settlement seen as too long · Scheme seen as unfair when compared to deal for YES Bank’s depositors · Sahakar Bharati had earlier made a case for the formation of a consultative body of stakeholders, including depositors at industry level