In what can be good news for depositors victims of banks that collapsed, Prime Minister Narendra Modi-led cabinet in its meeting today approved amendments to the DICGC Act, which insures all kinds of deposits up to Rs 5 lakh in all banks.
Under the DICGC Act, depositors of a bank that has been placed under moratorium will receive Rs 5 lakh of their money in 90 days.
Information and broadcasting minister Anurag Thakur said the Deposit Insurance Credit Guarantee Corporation was created to help those who faced difficulties after the RBI imposed moratoriums on banks. "Today's Cabinet meeting has decided that within 90 days, depositors will receive Rs 5 lakh of their money," he added.
The DICGC is a subsidiary of the Reserve Bank of India, and it provides insurance cover on bank deposits. The DICGC (Deposit Insurance and Credit Guarantee Corporation) Act is aimed at minimising troubles faced by depositors of stressed banks like the Punjab and Maharashtra Co-operative (PMC) Bank or Yes Bank and Lakshmi Vilas Bank.
The deposit insurance system covers all public, private, cooperative and foreign banks in India, barring some specific deposits.
The Act will provide a solution to the biggest issue of customers having zero access to their funds for a long period till the RBI lifts the curbs on such banks.
The changes in the DICGS Act are to ensure support to depositors of stressed banks when they need it, a finance ministry source said earlier. "Collapse of banks like PMC Bank caused distress. Depositors can't be made to suffer due to the misdeeds of the bank management. Easy and time-bound access for depositors has to be a priority. The bill will bring a change," the source said.
Legislation is likely to be moved in the ongoing monsoon session of Parliament.
This is yet another step by the current government to protect the depositors since the last budget. Finance minister Nirmala Sitharaman, in last her budget speech, had announced a long-awaited move to increase the insurance cover on each deposit to Rs 5 lakh compared to Rs 1 lakh earlier if the licence of a bank is cancelled and the liquidation process takes off.
The increased insurance cover on bank deposits was a welcome move, which came almost three decades later (since 1993). The Centre had said the Rs 5 lakh safety net covers almost 90 per cent of depositors in the country. This also meant a slightly higher premium paid by the banks, a burden that is not being passed on to bank depositors.
She had promised amendments to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961, in the budget session but could not do so as the session was cut short.
"I shall be moving amendments to the DICGC Act, 1961, in this session itself to streamline the provisions, so if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover," she had said.
The immediate beneficiaries of the DICGC Act amendments will be thousands of depositors of banks like PMC Bank, Yes Bank and Lakshmi Vilas Bank.
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