The government is thinking of a proposal to set a 90-day time-frame for buyers to be capable to have access to their deposits up to an insured quantity of Rs 5 lakh if their banks go bust or withdrawals are restricted, sources told FE. This will probably be a portion of the amendments that the government is organizing to introduce to the Deposit Insurance Credit Guarantee Corporation (DICGC) Act.
If authorized, the move will assist depositors have assured access inside a stipulated time-limit and meet monetary requires. Finance minister Nirmala Sitharaman has promised “easy and time-bound access” to the DICGC cover if banks fail. In the Budget for FY21, Sitharaman had announced raising the limit of bank deposits insured beneath the DICGC Act to Rs 5 lakh from Rs 1 lakh.
The Budget announcement had come right after Punjab and Maharashtra Co-operative Bank faced a grave fraud, with buyers demanding their whole revenue back. Subsequently, Yes Bank, as well, faced a crisis and restrictions have been imposed on each day withdrawals initially.
The DICGC is a wholly-owned arm of the Reserve Bank of India (RBI), which presents deposit insurance coverage. It insures deposit accounts, such as savings, existing, recurring, and fixed deposits up to a limit of Rs 5 lakh per account holder of a bank. If a customer’s deposit quantity crosses Rs 5 lakh in a single bank, only up to Rs 5 lakh, which includes the principal and interest, will be paid by DICGC if the bank turns bankrupt.
The government had kept the deposit cover unchanged at Rs 1 lakh due to the fact May 1993, when it was raised from Rs 30,000 right after the safety scam in 1992 had led to the liquidation of Bank of Karad in Maharashtra. The hike then was aimed at placating angry and concerned depositors of this private bank so that a run on even other banks could be avoided.
The Report of the Committee on Customer Service in Banks of the RBI had in 2011 recommended that the cover be raised drastically to at least Rs 5,00,000 to draw more folks to the banking fold.
Before the hike in cover limit, deposit insurance coverage covered about 92% of the total quantity of accounts in India but only 28% of the total deposits with the banking method.