New Delhi: In a move that will provide major relief to the common man, depositors in banks placed under moratorium will be able to avail the deposit insurance amount of up to Rs 5 lakh within 90 days, and won’t have to wait for a final resolution.
The decision is targeted at alleviating the suffering of depositors who can’t access their deposits if their bank is placed under a moratorium by the Reserve Bank of India (RBI). This is because depositors are subjected to a long waiting period pending resolution or liquidation of the bank.
Over the last few years, the collapse of banks like PMC Bank and the resulting problems faced by the depositors had led to a rethink of existing laws to make them more depositor friendly.
The amendments to the Deposit Insurance and Credit Guarantee Corporation Act were approved by the Union cabinet Wednesday, and will be tabled in the ongoing Parliament session.
Speaking at a press conference after the cabinet meeting, Finance Minister Nirmala Sitharaman said the amendments will give quick access to funds to depositors.
“There will be no waiting for the eventual liquidation, or even for the eventual resolution,” she said.
The amendments will apply to all banks operating in India including commercial banks, regional rural banks and cooperative banks.
Last year, the government had also raised the deposit insurance ceiling to Rs 5 lakh from Rs 1 lakh. The government estimates that more than 98 per cent of all depositors are under the coverage of deposit insurance after the increase in the ceiling.
Sitharaman pointed out that in the past depositors would get their insurance money 8-10 years after liquidation, or around 3-4 years in case of bank takeover.
“Even if there is a moratorium on a bank which means everything is frozen and depositors are not able to take their money out of their accounts, even at that time they will be able to get the insurance,” she said.
In her budget speech this year, Sitharaman had announced that the government will move amendments to the DICGC Act, 1961 “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. This would help depositors of banks that are currently under stress.”
(Edited by Amit Upadhyaya)