Deposit Insurance Act mean for investors: The Union Cabinet adopted an amendment to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act on Wednesday, allowing depositors of failing banks to access up to 5 lakh deposits within 90 days of a bank being placed under moratorium. This modification, presented today at a press briefing by Finance Minister Nirmala Sitharman, would ensure that depositors receive quick assistance.
Here’s more clarity on the amendment in DICGC Act for FD account holders:
-Depositors of a bank under moratorium will no longer have to wait to access their funds under the legislation. The Union Cabinet has determined that depositors will receive their money back in 90 days.
-Banks in crisis will have 45 days to take over to the insurance corporation. FM said that the procedure will be completed in 90 days without the need to wait for a conclusion.
-All commercial banks, including branches of foreign banks operating in India, will be subject to this legislation, which will also apply to banks that are now subject to a moratorium.
-Sitharaman further stated that the DICGC Act will cover 98.3 percent of all deposit accounts while providing above 50% coverage in terms of deposit value. “Each depositor’s deposit in a bank is protected for both principal and interest up to a maximum of 5 lakh. With an increase in the insurance sum from one lakh to five lakh, India will now cover 98.3 percent of all deposits “ccount,” stated the Finance Minister.
– “As a result, this clearance will provide relief to all those institutions that have previously been placed under a moratorium. It won’t go back in time, but if your bank has already been placed under a moratorium, this will cover you “she continued.
Last year, the government increased deposit insurance coverage fivefold to $5 lakh to help depositors of failing lenders such as Punjab and Maharashtra Co-operative (PMC) Bank. Following the failure of PMC Bank, Yes Bank and Lakshmi Vilas Bank also had financial difficulties, necessitating regulatory and government reorganisation.
The Finance Minister’s budget announcement is an amendment to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961. While providing details about the Cabinet meeting, Sitharaman stated that the Bill is expected to be introduced during the current monsoon session.
Thousands of depositors who had their money parked in strained institutions like PMC Bank and other small cooperative banks will receive immediate relief if the Bill becomes law. When a bank’s licence is revoked and the liquidation procedure begins, the deposit insurance of up to $5 lakh kicks in, according to current laws. The Reserve Bank of India’s wholly-owned subsidiary DICGC provides insurance on bank deposits.