New Delhi: The Supreme Court has upheld the merger of the crisis-hit Punjab and Maharashtra Cooperative (PMC) Bank with Unity Small Finance Bank (USFB), providing significant relief in one of India’s most closely watched banking resolution cases. The apex court declined to interfere with the Bombay High Court’s judgment, which had upheld the Reserve Bank of India’s (RBI) reconstruction and merger scheme. It also dismissed petitions challenging the phased repayment mechanism for depositors with balances exceeding ₹5 lakh.
During the hearing, the RBI informed the court that PMC Bank’s net worth had deteriorated to nearly negative ₹6,000 crore at the time of its reconstruction. According to the central bank, timely regulatory intervention was essential to prevent further deterioration of the bank’s financial position and to safeguard depositors’ interests. The RBI maintained that merging PMC Bank with Unity Small Finance Bank was the most viable and practical resolution.
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Established in 1984, PMC Bank had grown into one of India’s prominent urban cooperative banks, expanding its presence across Maharashtra and other states while attracting millions of depositors. However, the bank later became embroiled in one of the country’s biggest banking scandals after allegations surfaced that it had extended thousands of crores of rupees in loans to Housing Development and Infrastructure Ltd. (HDIL) without adequate security. Investigators also alleged that bank records were manipulated to conceal these exposures from regulators.
According to the allegations, between 2004 and 2019, the bank used thousands of fictitious or dummy accounts to hide its actual loan exposure. HDIL group entities allegedly received loans worth around ₹4,355 crore, with the transactions reportedly concealed from regulatory scrutiny. After the irregularities came to light in September 2019, the RBI imposed a moratorium on PMC Bank. Initially, depositors were permitted to withdraw only ₹1,000, with the limit later increased in phases to ₹50,000. The restrictions left lakhs of customers unable to access their savings, causing severe financial hardship for many families.
As part of the resolution process, Unity Small Finance Bank was established in 2021 as a joint venture between Centrum Financial Services and BharatPe. The RBI subsequently released a draft amalgamation scheme in November 2021, inviting suggestions from stakeholders. The Central Government approved the scheme in January 2022, formally merging PMC Bank into Unity Small Finance Bank. Since then, PMC Bank has ceased to exist as an independent entity, with all its branches and operations becoming part of USFB.
Under the approved merger scheme, depositors with balances of up to ₹5 lakh were provided relatively quicker access to their funds, while those with larger deposits were placed under a phased repayment schedule. It was this staggered repayment mechanism that some depositors challenged before the courts, arguing that they were being forced to wait several years to recover their entire deposits.
The RBI informed the Supreme Court that, under the reconstruction scheme, nearly 84% of PMC Bank depositors have already received their entire deposits. According to the regulator, a total of ₹4,852.33 crore has been repaid so far, while the remaining eligible depositors will continue to receive payments in accordance with the approved repayment schedule.
With the Supreme Court affirming the merger, the legal validity of PMC Bank’s reconstruction and its integration into Unity Small Finance Bank now stands reinforced. The ruling is expected to serve as an important precedent for regulatory intervention, depositor protection, and the resolution of financially distressed cooperative banks in India.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
