What changed
RBI clarified that UCBs cannot stop provisioning on interbank exposures from uninsured deposits in PMC Bank until PNCPS and Equity Warrants are actually received. After allotment, provisions can be reversed only if they exceed any loss from valuing PNCPS (fully provided) and warrants (₹1 each).
What it means for you
UCBs holding uninsured deposits in PMC Bank must maintain provisioning discipline until the actual allotment of conversion instruments. This ensures loss absorption is not delayed. PNCPS must be fully provided for by FY24, while warrants are treated as near-zero risk until conversion. Exemptions from SLR investment limits apply.
What you must do
- Continue full provisioning on uninsured interbank deposits with PMC Bank until PNCPS/Equity Warrants are actually credited.
- After allotment, reverse provisions only if they exceed loss from PNCPS (fully provided) and warrants (₹1 valuation).
- Fully provide for PNCPS investments by March 31, 2024, spreading net provisions over two financial years.
- Classify PNCPS and Equity Warrants as Non-SLR investments and ensure compliance with exemption from Master Circular limits.
- Monitor actual allotment date and adjust provisioning accordingly.
Who it affects
Primary (Urban) Co-operative Banks (UCBs), Institutional depositors of Punjab and Maharashtra Co-operative Bank, Unity Small Finance Bank (as issuer of PNCPS and warrants)
When can UCBs stop provisioning on uninsured deposits with PMC Bank?
Only after the actual allotment of PNCPS and Equity Warrants in their accounts. Until then, full annual provisioning at 20% per year continues as per the April 2020 circular.
How should UCBs value the Equity Warrants received?
Equity Warrants are valued at ₹1 per warrant. No provisions are needed now. Upon conversion to equity shares, valuation will be based on market prices.
What is the deadline for fully providing for PNCPS?
UCBs must fully provide for their PNCPS investments by March 31, 2024. They can spread the net provisions (after adjusting existing provisions on deposits) equally over two financial years.