Union Cabinet today (July 28, 2021) approved an amendment to the Deposit Insurance Credit Guarantee Corporation (DICGC) Bill to provide account holders access to up to Rs 5 lakh funds within 90 days of bank failure, Finance Minister Nirmala Sitharaman announced.
Finance Minister Nirmala Sitharaman on Wednesday announced that the Union Cabinet cleared the amendment to the Deposit Insurance Credit Guarantee Corporation (DICGC) Bill 2021, which would provide account holders an amount of up to Rs 5 lakh within 90 days of bank failure. The minister clarified that DICGC cover is available to all commercial banks including cooperative banks,.even foreign bank branches in India are covered under it.
Under the DICGC scheme, each depositor’s bank deposit is insured up to Rs 5 lakh in each bank (for both principal and interest) which was earlier limited to Rs.1 lakh. The increase of the insured amount from Rs 1 lakh to Rs 5 lakh will cover 98.3 per cent of all deposit accounts and 50.9 per cent of deposit value, Sitharaman noted.
The finance minister further informed that normally it used to take 8-10 years after complete liquidation to get money under insurance; but now, even if there is a moratorium, within 90 days, the process will definitely be completed, giving relief to depositors, the finance minister said. The finance minister also stressed the fact that the deposit insurance coverage applies to banks that will be put under the moratorium in the future as well as those that are already under the moratorium.
The 90-day period will be divided into two periods of 45 days. “The stressed bank is expected to collate all information regarding the number of claimants and claim amount and inform DICGC about it within the first 45 days. Within the next 45 days, DICGC is mandated to process the claim and make payment to each eligible depositor,” finance minister Nirmala Sitharaman said.
The finance minister also informed that the deposit premium that banks pay for the DICGC coverage will increase from Rs 10 paise to Rs 12 paisa per Rs 100 deposit. This means that the coverage has been raised by 5 times from Rs 1 lakh to Rs 5 lakh but the premium that banks pay has gone up only by 20%.