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Unity SFB’s OTS scheme fails to impress depositors

MUMBAI : Unity Small Finance Bank, formerly PMC Bank, has offered a one-time settlement option against all future payables for customers who maintained deposits worth up to 15 lakh. The OTS scheme offers an opportunity to customers to receive the deposit amount upfront, albeit at a discount of 37%, instead of having to wait for 10 years.

As part of the Early Encashment Scheme, the bank paid the first tranche in July, followed by a second instalment on 13 August. The next tranche will be paid out on 15 December.

“After the amalgamation of the bank in January, there was a strong request from a certain cross section of people to be able to get liquidity against the scheme promised to them over the next few years. These are people who have more than 5 lakh deposits with the bank, mainly senior citizens,” Jaspal Bindra, promoter of SFB, said. “It’s a voluntary scheme and it had very limited draw down. Our first preference was that they go with the (amalgamation) scheme,” he added.

According to the scheme of amalgamation of PMC Bank with Unity Small Finance Bank PMC Bank depositors will get their money back over a period of 3-10 years, and zero-interest payment against deposits for five years after 31 March 2021, and subsequently, a maximum of 2.75% interest on unpaid deposits. Unity SFB will make payments of up to 5 lakh or less received from DICGC to the eligible depositors. For the remaining amount, it would pay 50,000 above the payment already made by January 2023, followed by 50,000 by January 2024, 1 lakh by January 2025, 2.5 lakh by January 2026 and 5.5 lakh at the end five years (January 2027).

However, despite the strong interest for the OTS, there was not much demand for withdrawing deposits and the bank is set to close it after December this year, Bindra said.

“The number withdrawn is still below 100 crore. There is not much demand. Given the next five years, 2000 crore needs to be paid. Most people is ready to wait till the due date rather than take its upfront. We just responded to the customers because there was so much interest. We can go back to say we are stopping it as the actual take off is not much.”

The Reserve Bank of India had taken over the operations of the Punjab and Maharashtra Cooperative Bank, and had capped cash withdrawals and launched an investigation into its accounting lapses on 24 September 2019. It was placed under restrictions after investigations revealed that it was guilty of misreporting loans to Housing Development and Infrastructure Ltd (HDIL).

In June 2021, RBI cleared the decks for its takeover by the Centrum Group and payments company BharatPe, and subsequently a banking licence was issued to set up the small finance bank in October. Centrum’s micro, small and medium enterprise (MSME), and microfinance businesses will be merged with the new Unity SFB.

Earlier this year, the Centre notified a scheme for the amalgamation of PMC Bank with Unity. Within three months, the bank paid 3,800 crore to depositors after the Deposit Insurance and Credit Guarantee Corporation (DICGC) certified the valid accounts. The bank will pay another 2,000 crore over the next five years.

Bindra said the bank may offer the OTS because depositors who availed the DICGC money chose to deposit it back with the bank. “From the original disbursement we made of 5 lakh to all the people, under the mandatory payout, we expected that money to be fully withdrawn. But 40% of it has remained with bank, that is, customers who got the money put it back in the bank as deposits,” he added.

That said depositors are not happy with the scheme as they feel they are losing their own money. In fact, deposit holders have filed a petition against implementing the RBI scheme of amalgamation and the matter is expected to come up for hearing before the Bombay High Court next month.

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