Centre plans to amend depositors insurance law
In a bid to ensure timely support to depositors of stressed banks, the government may bring amendment to DICGC Act in the monsoon session with the objective to provide account holders easy and time-bound access to funds to the extent of the deposit insurance cover.
Last year, the government raised insurance cover on deposit five-folds to `5 lakh with a view to provide support to depositors of ailing lenders like Punjab and Maharashtra Co-operative (PMC) Bank. Following the collapse of PMC Bank, Yes Bank and Lakshmi Vilas Bank too came under stress leading to restructuring by the regulator and the government.
The amendment to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961 is the budget announcement made by the Finance Minister and the Bill is almost ready, sources said.
It is expected that the Bill will be tabled in the upcoming monsoon session after being vetted by the Union Cabinet,
New Delhi, May 16:
● The amendment to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961 is the budget announcement made by the Finance Minister and the Bill is almost ready, sources said. sources added.
Once the Bill becomes the law, it will provide immediate relief to thousands of depositors who had their money parked in stressed lenders such as PMC Bank and other small cooperative banks.
As per the current provisions, the deposit insurance of up to `5 lakh comes into play when the licence of a bank is cancelled and liquidation process starts.
DICGC, a wholly-owned subsidiary of the Reserve Bank of India, provides insurance cover on bank deposits.
Finance minister Nirmala Sitharaman in the Budget speech in February said the government had approved an increase in the Deposit Insurance cover from `1 lakh to `5 lakh for bank customers last year.
It could not be presented in the Budget session due to curtailment of the last session following the spread of second wave of
Covid-19 pandemic.
It is to be noted that the enhanced deposit insurance cover of Rs 5 lakh is effective from February 4,
2020. The increase was done after a gap of 27 years as it was static since
1993. The cover is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the RBI. With increased insurance cover, the banks are paying a higher premium of 12 paise against 10 paise per Rs 100 deposited without any additional burden on account holders.
● Once the Bill becomes the law, it will provide immediate relief to thousands of depositors who had their money parked in stressed lenders such as PMC Bank and other small cooperative banks.