News Analysis India

Tag: Deposit Insurance and Credit Guarantee Corporation amendment bill

  • Depositors of stressed banks to get up to Rs 5 lakh back from November 30

    By PTI

    NEW DELHI: Depositors of stressed banks like Punjab & Maharashtra Cooperative (PMC) Bank are now set to get up to Rs 5 lakh back from November 30 as the government has notified the amendment to the DICGC Act.

    Parliament earlier this month passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing a moratorium on the banks.

    The amount of Rs 5 lakh would be provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

    The government has notified September 1, 2021, as the date on which the provisions of the Act shall come into force, according to a gazette notification dated August 27, 2021.

    “In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September 2021, as the date on which the provisions of the said Act shall come into force,” it said.

    Consequently, 90 days from the effective date is November 30, 2021, for depositors to get their funds back.

    The first 45 days are meant for the bank, which has come under stress, to collect all the details of the accounts where the claims will have to be made.

    This will then be forwarded to the insurance company, which in real-time will check it all up, and nearer the 90th day, depositors will get the money, Finance Minister Nirmala Sitharaman had said.

    The benefit will also accrue to the depositors of 23 cooperative banks which are under financial stress and on which the Reserve Bank of India (RBI) has imposed certain restrictions.

    DICGC, a wholly-owned subsidiary of the RBI, provides insurance cover on bank deposits.

    At present, it takes 8-10 years for the depositors of a stressed bank to get their insured money and other claims.

    Though the RBI and the Centre keep monitoring the health of all banks, there have been numerous recent cases of lenders, especially cooperative banks, being unable to fulfil their obligations towards the depositors due to the imposition of a moratorium by the RBI.

    Last year, the government increased the insurance cover on deposits by five times to Rs 5 lakh.

    The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020.

    Every bank used to pay 10 paise as an insurance premium per Rs 100 of deposit.

  • Parliament passes Deposit Insurance and Credit Guarantee Corporation amendment bill

    By PTI

    NEW DELHI: The Lok Sabha on Monday passed a bill that seeks to ensure that account holders will get up to Rs 5 lakh within 90 days of the RBI imposing moratorium on their banks from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

    The Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 was passed by a voice vote amid an uproar by Opposition parties over various issues, including the Pegasus snooping row and farm laws.

    The Rajya Sabha passed the bill last week.

    Finance Minister Nirmala Sitharaman, in her brief statement, said the legislation will benefit small depositors, including those of the Punjab and Maharashtra Cooperative (PMC) Bank.

    The benefits will also accrue to the depositors of 23 cooperative banks, which are in financial stress and on which the Reserve Bank of India (RBI) has imposed certain restrictions, she said.

    Sitharaman said the interest of the small depositors will have to be kept in mind, adding that Prime Minister Narendra Modi has increased the insurance amount for them from Rs 1 lakh to Rs 5 lakh and within 90 days of moratorium being declared on a bank and also for those who are already under stress, the money will be available.

    Once the bill becomes law, it will provide immediate relief to lakhs of depositors, whose money is parked in stressed lenders such as the PMC Bank and other small cooperative banks.

    According to the current provisions, the deposit insurance of up to Rs 5 lakh comes into play when the licence of a bank is cancelled and the liquidation process starts.

    DICGC, a wholly-owned subsidiary of the RBI, provides an insurance cover on bank deposits.

    At present, it takes 8-10 years for the depositors of a stressed bank to get their insured money and other claims.

    Though the RBI and the Centre keep monitoring the health of all banks, there have been numerous recent cases of banks, especially cooperative banks, being unable to fulfil their obligations towards the depositors due to the imposition of a moratorium by the RBI.

    Last year, the government increased the insurance cover on deposits by five times to Rs 5 lakh.

    The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020.

    In September 2019, the RBI superseded the board of the PMC Bank and imposed various regulatory restrictions after financial irregularities came to light.