Depositors to get Rs. 5L insurance if bank under moratorium
The Indian government on Wednesday cleared amendments to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961, thus providing a big relief to the customers of failed or stressed banks. Depositors will now get an insurance cover of up to Rs. 5 lakh on their total deposits in around 90 days after a bank's failure or it being placed under moratorium.
An estimated 98.3% of all deposit accounts in commercial banks across the country will be covered under the provisions of this law, Union Finance Minister Nirmala Sitharaman said at a press conference today. In terms of the value of deposits, there will be a coverage of over 50%, she informed. Earlier, the maximum insured amount was Rs. 1 lakh under the said law.
Notably, the said 90-day period will be divided into two periods of 45 days each. The concerned bank will be required to collate information regarding the number of claims and the claim amount and inform the DICGC within the first 45 days, Sitharaman said. The succeeding period will be used to process the claim and make due payments to depositors.
The amendments mean that customers of banks that are placed under moratorium will no longer have to wait for the Reserve Bank of India (RBI) to liquidize the bank, which can be a lengthy process. The fresh provisions are aimed at reducing the hurdles faced by depositors of banks hit by frauds and bankruptcy, including the PMC Bank, Yes Bank, and Lakshmi Vilas Bank.
DICGC is a subsidiary of the RBI, which provides insurance coverage to bank account holders in case the bank fails to pay them. It covers all commercial and foreign banks in India and insures the money kept in all kinds of deposit accounts. Separately, the insurance premium for banks has been raised from 10 paise/Rs. 100 deposit to 12 paise, marking a 20% increase.