Cabinet clears DICGC Bill: Depositors of stressed banks to get up to Rs 5 lakh in 90 days

The Union Cabinet, on July 28, cleared the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, which insures all kinds of deposits up to Rs 5 lakh in all banks of India. Under the DICGC Act, depositors of banks that have collapsed and placed under a moratorium will receive Rs 5 lakh of their money in 90 days. Addressing a media briefing after the Cabinet meeting, Finance Minister Sitharaman said that this bill increases insurance coverage on deposits and reduces the time taken for depositors to recover the amount, in case a bank comes under financial stress.

"This decision will give relief to depositors whose banks are already under moratorium. We will be covering nearly 98.3% of all depositors," she said, adding that the bill will be tabled in Parliament in this session itself.

Information & Broadcasting minister Anurag Thakur said the DICGC Act was created to support those who faced difficulties after the RBI imposed moratoriums on banks. "Today's Cabinet meeting has decided that within 90 days, depositors will receive Rs 5 lakh of their money," he added.

The DICGC is a subsidiary of the Reserve Bank of India, that provides insurance cover on bank deposits. It is aimed at minimizing troubles faced by depositors of stressed banks like the Punjab and Maharashtra Co-operative (PMC) Bank or Yes Bank and Lakshmi Vilas Bank. The deposit insurance system covers all public, private, cooperative, and foreign banks in India, except for some specific deposits. 
 
The Act 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 moratorium on such banks.

RBI Extends Regulatory Restrictions On PMC Bank

Earlier this month, the RBI extended the regulatory restrictions on Punjab and Maharashtra Cooperative (PMC) Bank by another six months till December 2021 to enable the completion of its takeover by Centrum Financial Services.

Paving the way for a takeover of the crisis-ridden bank, earlier in the month, RBI had granted in-principle approval to Centrum Financial Services to set up a small finance bank (SFB). In September 2019, the RBI had superseded the board of PMC Bank and placed it under regulatory restrictions, including a cap on withdrawals by customers, after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL. The restrictions have been extended several times since then.

With inputs from PTI