Entire loss of PMC Bank being thrust on depositors: Sahakar Bharati to RBI

Repay PMC depositors' money in 5 years and pay at least 6% interest per annum, the umbrella body of co-operative organisations tells RBI

Sahakar Bharati wants small depositors of fraud-hit Punjab & Maharashtra Co-operative (PMC) Bank to be paid their money in five years from the appointed date. Further, the depositors should be paid interest at least equal to the average inflation rate per annum, but minimum six per cent till repayment, Sahakar Bharati said on Saturday.

In a communication to the Reserve Bank of India, the umbrella body of co-operative organisations suggested changes to the draft scheme for the amalgamation of PMC Bank with Unity Small Finance Bank (SFB). 

"It was expected that the resolution of the PMC Bank crisis would be to protect the interests of the hapless depositors. It was expected that Unity SFB would provide a fair and just solution to the depositors. However, the entire loss suffered by the PMC Bank is being thrust on the shoulders of the depositors," Sahakar Bharati said. 

Considering the severe pain and financial difficulties, the depositors should be paid as early as possible, it said.

As per the draft scheme, the depositors are to be paid during the next 10 years in instalments and that too without interest for the first five years and with interest of 2.75 per cent per annum thereafter. As a result, those having deposits over Rs 5 lakh will get their money back only after a very long period, the co-operative body said.

In India, the average inflation rate (CPI-Combine) during the last ten years has been 6.26%. It means the value of one rupee got depreciated by 6.26 per cent per year over the last 10 years. “If we consider that the same rate of inflation continues, for the next ten years, the value of one rupee will be NIL by the time the depositors get back their monies," Sahakar Bharati said. 

Alternatively, with the consent of the depositors, a part or their entire deposits could be converted into bonds with maturity of maximum seven years. The newly licensed Unity SFB Ltd (USFB) should have these bonds rated and listed at the earliest so that depositors will get an option to receive their monies at an early date. These bonds should carry an interest rate equal to deposit interest rate of State Bank of India or 10-year benchmark government securities, Sahakar Bharati suggested. 

Referring to institutional deposits, Sahakar Bharati said the dividend rate of Perpetual Non-Cumulative Preference Shares (PNCPS) should be at least equal to the rate of average inflation during the last 10 years to safeguard their monetary value. 

Under the draft scheme, 80 per cent of uninsured deposits of the institutional deposits are proposed to be converted into 1% PNCPS with an option to USFB to increase dividend or a call option, upon receipt of approval from the RBI. 

There should be a definite repayment plan specified. Further, the 20% amount of institutional deposits should be converted into equity shares of Unity SFB, may be with lock-in-period of seven years or IPO, whichever occurs earlier, the co-operative body added.