The government has notified a modification to the DICGC Act, which will allow depositors of troubled banks like Punjab & Maharashtra Cooperative (PMC) Bank to obtain up to Rs 5 lakh back starting November 30. The Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021, was enacted by Parliament earlier this month, ensuring that account holders receive up to Rs 5 lakh within 90 days of the RBI putting an embargo on banks.
The Deposit Insurance and Credit Guarantee Corporation would provide a sum of Rs 5 lakh (DICGC).
According to a gazette announcement dated August 27, 2021, the government has set September 1, 2021, as the day on which the Act’s provisions will take effect.
“In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September 2021, as the date on which the provisions of the said Act shall come into force,” it said.
As a result, depositors will get their monies 90 days after the effective date, on November 30, 2021.
The first 45 days are set aside for the bank, which is under duress, to gather all of the information on the accounts that would be subject to claims. This will be submitted to the insurance provider, which will review everything in real-time, and depositors would receive their money around the 90th day, according to Finance Minister Nirmala Sitharaman.
In addition, the Reserve Bank of India (RBI) has imposed some limitations on 23 cooperative banks that are in financial distress.
The Depositors of a troubled bank currently have to wait 8-10 years to receive their protected funds and other claims.
Even though the RBI and the Centre keep a close eye on all banks’ health, there have been numerous recent incidents of lenders, particularly cooperative banks, being unable to meet their depositor obligations due to the RBI’s moratorium.
Last year, the government upped the deposit insurance cover to Rs 5 lakh, a fivefold increase. From February 4, 2020, the higher deposit insurance cover of Rs 5 lakh becomes effective DICGC is a wholly-owned subsidiary of the RBI that insures bank deposits.