Depositors in ailing banks like the PMC Bank may get some relief soon, with the Union Cabinet on July 28 clearing amendments to the country’s deposit insurance law to return upto ₹5 lakh of their savings within 90 days of the central bank’s imposition of a moratorium on a bank’s operations.
“The Deposit Insurance Credit Guarantee Corporation Bill 2021 has been cleared by the Cabinet today,” Finance Minister Nirmala Sitharaman said in a briefing on July 28, adding that the Bill will be taken to Parliament in the ongoing session.
“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 complete liquidation of the bank. Now, what we are saying is even if there’s a moratorium, this [90-day] measure will set in,” Ms. Sitharaman said.
As per 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 Deposit Insurance Credit Guarantee Corporation (DICGC) within 45 days. The Corporation will get another 45 days to check these details and process the claims.
“Each depositor’s balance of ₹5 lakh is guaranteed for both principal and interest,” the Minister said, adding that this will provide a significantly larger safety net for India’s bank customers compared to their global peers.
“With the deposit insurance increased from ₹1 lakh to ₹5 lakh, it will cover 98.3% of all deposit accounts and 50.9% of all deposits’ value. Just compare this with what prevails outside — only 80% of deposits are insured with 20%-30% of deposit value globally,” she pointed out.
The Deposit Insurance premium normally paid by banks to the DICGC is being raised from 10 paise for every ₹100 deposit, to 12 paise and a limit of 15 paise has been imposed. The Minister said this was only an enabling provision and an increase in the premium payable will determined will involve consultations with the RBI and require a government approval.
“From 2019 till now, for PMC Bank depositors, the government under Prime Minister Narendra Modi’s guidance has been working overtime to resolve the problem,” she said.