Parliament clears DICGC (Amendment) Bill, 2021; relief to customers of banks facing RBI curbs

The Deposit Insurance and Credit Guarantee Corporation (DICGC) (Amendment) Bill, 2021, has been passed by Parliament. It will provide a solution to the biggest issue of bank customers who cannot access their funds if the RBI puts curbs on bank. The immediate beneficiaries of the DICGC Act amendments will be thousands of depositors of banks like PMC Bank, Yes Bank and Lakshmi Vilas Bank.

The main features of the bill are interim payment by DICGC to depositors in banks with restrictions or moratorium imposed by the RBI; depositors getting access to their money without waiting for years till liquidation, etc; clear-cut timeline of a maximum of 90 days provided for an interim payment to depositors; and provision to cover existing cases where banks are already under restrictions.

The bill will also ensure timely repayment to DICGC and expedite recoveries, and will enable ceiling on premium to be notified by the DICGC, with the prior approval of the RBI. After the passage of this bill, the deposit insurance coverage in India has gone up to 98.3 per cent and covered deposit value has increased to 50.9 per cent, while the corresponding figures globally are only 80 per cent and 20-30 per cent.

Also read: Budget 2021: Relief for depositors! Now 'time-bound' access to deposits if bank goes bust

Prime Minister Narendra Modi-led Cabinet had approved amendments to the DICGC Act, which insured all kinds of deposits up to Rs 5 lakh in all banks, on July 28. The DICGC is a subsidiary of RBI and provides insurance cover on bank deposits.

The deposit insurance system covers all public, private, cooperative and foreign banks in India, barring some specific deposits. 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 the long-awaited move to increase the insurance cover on each deposit to Rs 5 lakh from Rs 1 lakh earlier if the licence of a bank is cancelled and the liquidation process takes off.

Also read: Granted approval to establish small finance bank to take over PMC Bank: RBI to HC