Business / Customers of banks under moratorium to get ₹5 lakh deposit insurance within 90 days

Zoom News : Jul 28, 2021, 06:28 PM
New Delhi: Prime Minister Narendra Modi-led cabinet in its meeting today (July 28) cleared amendments to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act.

The proposed amendments will provide a solution to the biggest issue of customers having zero access to their funds for a long period till the RBI lifts the curbs on such banks. Finance Minister Nirmala Sitharaman announced that even if there is a moratorium on the bank, depositors will get their deposit insurance amount within 90 days.

Deposit Insurance Credit Guarantee Corporation was created in case people faced difficulties after RBI imposes moratoriums on banks. Today's Cabinet meeting has decided that within 90 days, depositors will receive Rs 5 lakhs of their money," said Union Minister Anurag Thakur in the press briefing after the Cabinet meeting.

The changes to the DICGC Act are aimed at minimising troubles faced by depositors of stressed banks like the Punjab and Maharashtra Co-operative (PMC) Bank or Yes Bank and Lakshmi Vilas Bank.

For the unversed, the DICGC is a subsidiary of the Reserve Bank of India, and it provides insurance cover on bank deposits. The deposit insurance system covers all public, private, cooperative and foreign banks in India, barring some specific deposits. The DICGC insures all deposits such as savings, fixed, current, recurring, etc. deposits except the following types of deposits

Deposits of foreign Governments;

Deposits of Central/State Governments;

Inter-bank deposits;

Deposits of the State Land Development Banks with the State co-operative bank;

Any amount due on account of and deposit received outside India

Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India

As per DICGC, all funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks they would then be separately insured.

Note that the DICGC insures principal and interest up to a maximum amount of five lakh rupees. For example, if an individual had an account with a principal amount of Rs 4,95,000 plus accrued interest of Rs 4,000, the total amount insured by the DICGC would be Rs 4,99,000. If, however, the principal amount in that account was Rs 5 lakh, the accrued interest would not be insured, not because it was the interest but because that was the amount over the insurance limit.