MUMBAI, March 19 -- The Bombay High Court has upheld the amalgamation of fraud-hit Punjab and Maharashtra Cooperative (PMC) Bank with Unity Small Finance Bank. The court dismissed seven petitions challenging the 2022 decision of the Reserve Bank of India, observing that the scheme was in the best interest of depositors as it promises to return all their deposits with permissible interest. "Unity Bank has literally pulled up PMC Bank and its depositors, who faced an acute financial crisis and has rather offered a fresh breath of air, by securing the interest of the depositors," said a division bench of Justice Bharati Dangre and Justice Manjusha Deshpande, while dismissing petitions filed by over 225 institutional depositors of the bank, challenging the amalgamation. Therefore, the bench said, it did not find any reason to disrupt the amalgamation scheme, which was in the best interest of depositors and also of those who are yet to receive their principal amounts. The court also considered that the amalgamation scheme assured 100% return of their principal with permissible interest. PMC Bank, a multi-state cooperative bank, collapsed in 2019, when massive financial fraud was detected. It was found that the bank had lent money - up to 70% of its loan book - to insolvent real estate firm, HDIL, through dummy accounts. Two years later, the central government approved an amalgamation scheme, where Unity Small Finance Bank took over PMC Bank's branches, assets and liabilities, with a structured repayment plan for depositors. However, a section of depositors challenged the plan, claiming it was discriminatory. They said that while individual depositors with deposits of less than Rs.15 lakh had received all their deposits, the scheme provides for staggered payment to them. They argued that the classification of depositors was "unreasonable and not based on rational criteria" and that institutional depositors, although very small in number, were also deprived of interest after March 31, 2021, for a period of five years, and would receive interest at a reduced rate of 2.75% pa thereafter. The RBI, on the other hand, justified the action, pointing out that as of September 30, 2021, the net worth of PMC Bank was in the negative to the extent of Rs.6,737.61 crore, that deposit erosion steadily increased to 62.99%, and that around 83% of the bank's loan portfolio had turned into non-performing assets. The banking regulator eventually accepted the offer of Unity Small Finance Bank and the amalgamation scheme of PMC Bank, which was approved by the central government on January 25, 2022. The RBI further claimed that over 84% of the bank's depositors were able to withdraw their entire account balance of Rs.4,852.33 crore, as of February 2, 2026. The high court accepted the RBI's contentions and held that the classification of investors under the scheme was aimed at securing public interest and protecting the interest of the largest number of depositors....