Depositors of troubled banks like PMC Bank may soon receive some relief, as the Union cabinet passed on July 28 amendments to the country's deposit insurance law to return up to 5,00,000 savings deposits within 90 days from the date the central bank levies the tax. a ban on the operation of a bank.
"Deposit Insurance Credit Corporation Bill 2021 has been approved by the Cabinet today," Finance Minister Nirmala Sitharaman said at a press conference on July 28, adding, that the bill will be presented to the National Assembly in the current session.
“Depositor access to funds is a question of when it will be allowed and under what conditions. Usually, it takes about 810 years after a bank is fully operational. Now what we are saying is that even if there is a moratorium, this measure [90 days] will apply,” Ms. Sitharaman said.
According to the proposed procedure, once a bank is in trouble, it will need to collect all account balances and details and share them with the Deposit Insurance Credit Guarantee Corporation ( DICGC) within 45 days. The company will have an additional 45 days to verify these details and process the complaint.
"Each depositor's balance of 5 lakh is guaranteed for both principal and interest", the minister said, adding that this would provide a significantly larger safety net for the banks' customers. India compared to their global counterparts.
“With the increase of deposit insurance from 1 lakh to 5 lakh, it will cover 98.3% of all deposit accounts and 50.9% of the value of all deposits. Just compare that to what's common outside - only 80% of deposits are insured with 20% to 30% of the world's deposit value,” she stressed.
The deposit insurance fee normally paid by banks to DICGC is reduced from 10 paise for every 100 rupee deposit to 12 paise, and a limit of 15 paise has been introduced. The minister said that this is only a permissive clause and that the increase in premiums payable will involve consultation with the RBI and a request for government approval.
“From 2019 until now, for PMC Bank depositors, the government of Prime Minister Narendra Modi has been working overtime to resolve the issue,” she said.