Now, depositors can withdraw up to ₹5 lakh if bank placed under moratorium

Our Bureau New Delhi | Updated on August 09, 2021

Parliament has given its approval to a Bill to amend the Deposit Insurance and Credit Guarantee Corporation Act, 1961.

The amendment to the Act will enable depositors to access their deposit up to sum prescribed under deposit insurance, which is ₹5 lakh, in case the bank is placed under moratorium, and that too within 90 days. The Rajya Sabha gave its nod to this Bill last week and on Monday, Lok Sabha cleared it. Now, the Bill will be sent to the President for his assent post which it will become law.

Depositors of PMC Bank are likely to be covered under the new mechanism.

As of now, depositors have to wait for liquidation or passage of resolution to get the benefit of deposit insurance. This takes 8-10 years. Now, this will not be the situation. Finance Minister Nirmala Sitharaman has already said that payment is to be made within 90 days. “First 45 days will be taken by the banks for collecting the information and next 45 days for checking. Then on 91st or 92nd day or around that, payment will be made,” Sitharaman had said while announcing the Cabinet decision on July 28.

Last year, the Government raised the deposit insurance to ₹5 lakh from ₹1 lakh. Sitharaman said that with this, 98.3 per cent in terms of number of deposit accounts and 50.9 per cent in terms of deposit value will be covered. Globally, these numbers are 80 and 20-30 per cent respectively.

Time-bound access

This Bill is a follow-up to the Budget announcement. Finance Minister had said that amendments to the DICGC Act would aim to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover.

According to the legislative agenda prepared for the Monsoon session, the purpose of this Bill is to instil confidence in depositors about the safety of their money.

The objective is to enable depositors access to their savings through deposit insurance in a time-bound manner in case there is suspension of banking business of the insured bank under various provisions of the Banking Regulation Act, 1949.

Source: https://www.thehindubusinessline.com/money-and-banking/now-depositors-can-withdraw-up-to-5-lakh-if-bank-placed-under-moratorium/article35812585.ece