To provide relief to depositors in stressed banks like Punjab and Maharashtra Co-operative (PMC) Bank, the Union Cabinet on Wednesday approved amendments to the Deposit Insurance and Loan Guarantee Corporation Act of 1961 (DICGC Act). Depositors from banks with moratorium no longer have to wait for the Reserve Bank of India (RBI) to rescue the bank to gain access to their funds. Account holders are given access to funds of up to Rs 5 lakh within 90 days after a bank falls under the moratorium to provide timely support to depositors.
“We’re not doing a retrospective. But banks currently under a moratorium will be covered. And this will be the future process, “said Finance Minister Nirmala Sitharaman. The aim is to minimize the hurdles for depositors from banks such as PMC Bank, Yes Bank and Lakshmi Vilas Bank. At least 98.3% of all deposit accounts are covered in relation to this on the value of the deposits over 50% coverage, she added.
The central government raised the deposit insurance from 1 lakh to 5 lakh last year. The amendment to the Deposit Protection and Credit Protection Act (DICGC) 1961 was announced by the Minister of Finance during the 2021 budget. said the finance minister in her budget speech.
Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned subsidiary of RBI. The agency provides insurance coverage to the holders of bank deposits if the bank fails to pay their depositors. DICGC protects depositors’ money that is held with all India-based commercial and overseas banks; central, state and municipal credit unions; regional rural banks; and local banks. DICGC insures all types of bank deposit accounts such as savings, checking, recurring and time deposits up to a limit of Rs. 5 lakh per account holder per bank.
Once the bank has been placed under moratorium, the lender will collect all account holder details against which claims need to be made. The claims are then forwarded to the deposit insurance and credit guarantee company for further processing. The agency will review the data within the next 45 days and begin releasing the funds to clients. “On the 91st
The bill is expected to be unveiled in the current monsoon session, Sitharaman said while sharing details about the cabinet meeting. It will provide instant relief to thousands of depositors who have parked their money with stressed lenders like PMC Bank and other small credit unions. Under current regulations, deposit insurance of up to Rs 5 lakh comes into play when a bank’s license is revoked and the liquidation process begins.
“This is a welcome relief step for small depositors. There is certainly scope for the limit to be raised further as in the event of a bank failure, the middle income depositors may still not benefit fully and a merger, etc., ”said Jyoti Prakash Gadia, Managing Director of Resurgent India.
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