Mumbai,  The Centre on Tuesday gave its nod to amalgamate the Punjab and Maharashtra Co-operative Bank (PMC Bank) with the New Delhi-based Unity Small Finance Bank (USFBL).

As per the Reserve Bank of India, the amalgamation will come into force with effect from the date of the notification of the scheme i.e. January 25.

"All the branches of the PMC Bank will function as branches of Unity Small Finance Bank Ltd. with effect from this date.

"USFBL is making necessary arrangements to implement the provisions of the scheme," it said.

The RBI said that the scheme envisages takeover of assets and liabilities of PMC Bank, including deposits, by the USFBL.

The central bank had, last year, announced a draft scheme of amalgamation of PMC Bank with USFB, a brand new bank which commenced operations on November 1, 2021. The bank was set up with capital of about Rs 1,100 crore as against regulatory requirement of Rs 200 crore for setting up a small finance bank under the guidelines for on-tap licensing of small finance bank in private sector dated December 5, 2019, with provision for further infusion of capital at a future date after amalgamation.

This is expected to ensure solvency and continuity of the amalgamated entity.

As per the RBI approved scheme of amalgamation, equity warrants of Rs 1,900 crore were issued by the USFB on November 1 to the promoters to bring further capital. The warrants are to be exercised anytime within a total period of eight years.

The RBI had invited suggestions and objections from members, depositors and other creditors of transferor bank (PMC) and transferee bank (USFB), on the draft scheme till December 10, 2021.

Under the scheme, PMC depositors will get their full amount back over a period of 10 years. In the initial phase, the bank will pay the amount insured under DICGC of up to Rs 5 lakh to the depositors. Later, at the end of two years, the USFB will pay up to Rs 50,000, and up to Rs 1 lakh at the end of three years, Rs 3 lakh at the end of four years, Rs 5.5 lakh at the end of five years and the full amount will be paid after 10 years.

Additionally, the apex bank had said that the interest on any of the interest bearing deposits with the bank will not accrue after March 31, 2021.