In a relief to depositors of ailing banks like PMC, the Union Cabinet on Wednesday cleared amendments in the Deposit Insurance Credit Guarantee Corporation (DICGC) Act, under which depositors will get insurance of Rs 5 lakh on their total deposits within 90 days of the affected bank getting placed under moratorium.
Union Finance Minister Nirmala Sitharaman said in a briefing, "DICGC Bill 2021 has been cleared by the Cabinet today. Accessing depositors money has been an issue of when it will be allowed and under what conditionalities. Normally, it takes about 8-10 years, after the complete liquidation of the bank. Now, what we are saying is even if there's a moratorium, this (90-day) measure will set in."
According to the proposed process, once a bank is in trouble, it will have to collect all the account details and balances and share it with the DICGC within 45 days. The Corporation will get another 45-days to check these details and process the claims.
"With the deposit insurance increased from Rs 1 lakh to 5 lakh, it will cover 98.3 per cent of all deposit accounts and 50.9 per cent of all deposits' value. Just compare this with what prevails outside - only 80 per cent of deposits are insured with 20-30 per cent of deposit value globally," she pointed out.
The DICGC is a subsidiary of the Reserve Bank of India and provides insurance cover on bank deposits. The DICGC Act is aimed at minimising troubles faced by depositors of stressed banks like Yes Bank, PMC Bank and Lakhsmi Vilas Bank.
The deposit insurance covers all public, private, cooperative and foreign banks of India, barring some specific deposits.
The Act will provide huge relief to customers having zero access to their funds for a long period of time till the RBI lifts the ban on such banks.