If you are worried your deposits may get stuck in your bank if it goes bust, you have a reason to cheer. Finance Minister Nirmala Sitharaman in her Budget speech announced that depositors will have an 'easy and time-bound' access to deposits if a bank gets liquidated. The government will amend the Deposit Insurance and Credit Guarantee Corporation Act (DICGC), 1961 for the same.
DICGC, a wholly-owned subsidiary of the Reserve Bank of India (RBI), provides deposit insurance to bank depositors if a bank fails to pay them their deposits. Last year, the amount of deposit insurance per individual was hiked to Rs 5 lakh from Rs 1 lakh. However, it takes a long time before depositors get back their dues. PMC Bank depositors are still fighting for it.
The Rs 5 lakh insurance includes both principal and interest amount held by each depositor in the same right and capacity as on the date of liquidation or cancellation of bank's licence or the date on which the scheme of amalgamation or merger or reconstruction come into force. After the amendment, this may change.
"So far, the claim on deposit insurance could be made only after the bank's licence was cancelled and its liquidation proceedings were started. Now as per the latest announcement, bank customers whose accounts are frozen can also expect to get access to their funds up to the insurance limit. This is a positive development and protect bank customers from the kind of situations we had seen in the recent past when the RBI had imposed moratorium on banks and limited access to deposits," says Adhil Shetty, CEO, BankBazaar.com.
Note that as an individual if you own various sole ownership accounts such as a savings account, current account, fixed deposit or a recurring deposit, the insurance cover will still be limited to Rs 5 lakh as a total cover that clubs all accounts together.
If you have deposits in different branches of the same bank under same ownership capacity, the insurance cover will be limited to Rs 5 lakh for all.
Also read: Budget 2021 speech highlights: IPO of LIC to come in 2021-22, says FM
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