Virendra Pandit
New Delhi: With the Union Cabinet clearing amendments to the Deposit Insurance Credit Guarantee Corporation (DICGC) Act, bringing relief to depositors in stressed banks, they can now get back their money up to Rs. 5 lakh, Finance Minister Nirmala Sitharaman said on Wednesday.
“The DICGC Bill, 2021, has been cleared by the Union Cabinet today,” she said at a press briefing here.
“Under this Bill, 98.3 per cent of all deposits will get covered and in terms of deposit value, 50.9 per cent deposit value will be covered. Global deposit value is only 80 per cent of all deposit accounts. It only covers 20-30 per cent of the deposit value.”
As per the fresh amendments proposed in the act, depositors in stressed or failed banks that have faced regulatory action from the RBI must receive insurance on their bank deposits — to the tune of Rs 5 lakh — within 90 days.
The move is likely to benefit depositors in stressed banks like the Punjab and Maharashtra Cooperative Bank (PMC), Yes Bank and Lakshmi Vilas Bank.
The DICGC is a subsidiary of the Reserve Bank of India (RBI) and provides insurance cover on bank deposits. The act covers all public, private, cooperative and foreign banks in India, barring some specific deposits, according to media reports.
Depositors in stressed banks lacked access to their own funds over long periods due to the RBI-imposed restrictions. The latest amendment to the law seeks to address this crucial matter.
This is the second important step taken by the Centre since the last Union budget to protect bank depositors.
In her Budget speech, Sitharaman had promised an increase in insurance cover on bank deposits from Rs. 1 lakh to Rs 5 lakh, in case a bank faced licence cancellation and liquidation.
She had also promised to amend the DICGC Act, 1961, but could not move forward as the Budget Session was cut short due to the pandemic.
“I shall be moving amendments to the DICGC Act, 1961 in this session itself to streamline the provisions, so that 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.