The Reserve Bank of India has submitted the resolution scheme for Punjab & Maharashtra Cooperative Bank Ltd. to the government for final approval even as it received objections from stakeholders, according to two people with direct knowledge of the matter. The government has yet to approve the plan.
It has been over a month since the regulator received suggestions on the draft plan it had released in November. The RBI had sought responses by Dec. 10, following which it would work on the final plan.
The draft scheme included a depositor repayment plan proposing:
Retail depositors with outstanding deposits worth up to Rs 5 lakh would be repaid in full.
Deferred repayment of up to 10 years, depending on the size of the deposits, for retail depositors with outstanding deposits of more than Rs 5 lakh.
Converting outstanding deposits to perpetual non-convertible preference shares and equity warrants for institutional depositors.
The RBI received a few thousand suggestions from individual depositors, housing societies, religious institutions and cooperative industry bodies opposing its plan, the people cited earlier said.
BloombergQuint's queries emailed to the Finance Ministry and the RBI on Thursday didn't elicit a response.
What's The Opposition?
Stakeholders urged the RBI to reconsider its plan and ensure quick repayment to retail and institutional depositors who have been waiting for their money for over two years.
The regulator had placed deposit withdrawal restrictions on PMC Bank in September 2019. After multiple extensions, the RBI in December had extended the validity of the restrictions up to March 31.
Sahakar Bharati, an umbrella body for cooperative banks in India, had argued that proposals to stagger out deposit payout without interest for a period of time is against the interest of depositors.
Separately, Sahakar Bharati also met with Union Finance Minister Nirmala Sitharaman to seek her intervention in the matter, the first of the two people cited earlier said.
PMC Bank Account Holder Forum, a body of individual and institutional depositors, wrote to Sitharaman and Amit Shah, minister for home affairs and cooperation, on Jan. 1, seeking their intervention. BloombergQuint has reviewed a copy of the letter.
In the letter, the forum claimed that the stress at PMC Bank was not a usual bank failure but a case of fraud. The depositors appealed for an equitable resolution of the crisis through recapitalisation, fund infusion, reconstruction, restructuring, merger of the bank while protecting stakeholder interests.
"We have been writing to the RBI since March 2021 and have written at least 10 letters seeking an in-person hearing as well as participation in the resolution process," said Dipika Sahani, coordinator of the forum.
If the final resolution plan does not amend the repayment plan properly, the depositors and other stakeholders will be forced to seek legal recourse, Sahani said. "We will wait for the final plan to come out before taking the next steps."
The RBI has considered the opinions expressed by these stakeholders, before submitting the resolution scheme to the government, the second person quoted above said. As such, the government's approval for the plan is essential before it is implemented. So far, the government has not expressed any opinion, the second person said.
The RBI has provided a banking licence to Unity Small Finance Bank Ltd. as part of the resolution process. The small finance bank is a joint venture between the Centrum Group and payments firm BharatPe, operated by Resilient Innovations Pvt.
Centrum Group and BharatPe will cumulatively invest Rs 500 crore in the first phase and then another Rs 400 crore over the first year of operations. While Centrum Group will hold 50.1%, BharatPe will hold 49.9% stake in the bank.
As part of the plan, Unity Small Finance Bank will take over the assets and liabilities of PMC Bank, its branch network and employee base. As of March 31, 2020, the latest data available, PMC Bank had a deposit base of Rs 10,727 crore and loans worth Rs 4,473 crore.
The RBI has approved the appointment of Vinod Rai as an independent chairman of Unity Small Finance Bank on Thursday. Apart from Rai, the board will include RBI veteran Sandip Ghose, former Syndicate Bank Chairman Basant Seth and former RBL Bank Chairman Subhash Kutte, the small finance bank said in a statement.
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