The Union Cabinet on Wednesday approved amendment to the DICGC Act to provide account holders access to up to Rs 5 lakh funds within 90 days of a bank coming under moratorium to ensure timely support to depositors.

Last year, the government raised insurance cover on deposit five-folds to Rs 5 lakh to provide support to depositors of ailing lenders like Punjab and Maharashtra Co-operative (PMC) Bank.

Following the collapse of PMC Bank, Yes Bank and Lakshmi Vilas Bank too came under stress, leading to restructuring by the regulator and the government.

The amendment to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961 is the budget announcement made by the Finance Minister.

The Bill is expected to be introduced in the current monsoon session, Finance Minister Nirmala Sitharaman said, while sharing details about the Cabinet meeting.

Once the Bill becomes law, it will provide immediate relief to thousands of depositors, who had their money parked in stressed lenders such as PMC Bank and other small cooperative banks.

As per the current provisions, the deposit insurance of up to Rs 5 lakh comes into play when the licence of a bank is cancelled and the liquidation process starts.

DICGC, a wholly-owned subsidiary of the Reserve Bank of India, provides insurance cover on bank deposits.