Under the amendment, depositors of a bank under moratorium will no longer have to wait to access their money
All commercial banks and even branches of foreign banks operating in India will come under the purview of this Act
In a major relief to depositors of troubled banks, the Union Cabinet on Wednesday approved an amendment to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, under which, account holders can access up to ₹5 lakh deposits within 90 days of a bank coming under moratorium. This amendment, as announced by Finance Minister Nirmala Sitharman in a press conference today, will ensure timely support to depositors.
Here's more clarity on the amendment in DICGC Act for FD account holders:
-Under the amendment, depositors of a bank under moratorium will no longer have to wait to access their money. The Union Cabinet has decided that in 90 days depositors will get their money back.
-First 45 days will go for banks in distress to hand over to the insurance corporation. Within 90 days process will be definitely completed without waiting for resolution, added FM.
-All commercial banks and even branches of foreign banks operating in India will come under the purview of this legislation and this will be applicable to banks which are at present under moratorium.
-Sitharaman also said that 98.3% of all deposit accounts will get covered while in terms of value of the deposits, over 50% coverage will be there by DICGC Act. "Each depositors deposit in a bank is insured up to a maximum of ₹5 lakh, for both principal and interest. Now in India with an increase in insurance amount from ₹1 lakh to ₹5 lakh is going to cover 98.3% of all deposit account," Finance Minister said.
-"This clearance now, therefore, is going to give relief to all those institutions which have already come under moratorium. It is not going retrospectively back, but if your bank has already been declared under moratorium, this will cover," she added.
Last year, the government raised insurance cover on deposit five-folds to ₹5 lakh 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. The Bill is expected to be introduced in the current monsoon session, Sitharaman said, while sharing details about the Cabinet meeting.
Once the Bill becomes 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 the liquidation process starts. DICGC, a wholly-owned subsidiary of the Reserve Bank of India, provides insurance cover on bank deposits.
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