The Union cabinet on Wednesday approved amendments to the Deposit Insurance and Credit Guarantee Corporation Act that assures a payoff of up to Rs 5 lakh within 90 days after a moratorium is imposed on a bank.
At present, depositors have to wait for liquidation or passage of a resolution to get insurance. This can take up to 8-10 years. This will not be the situation now and payment has to be made within 90 days, finance minister Nirmala Sitharaman said.
“First 45 days will be taken by the banks to collect the information and the next 45 days to check. Then on the 91st or 92nd day or around that time, the payment will be made,” Sitharaman said while announcing the cabinet decision here. The Bill will be tabled during the current session.
Last year, the government raised the insurance limit after 27 years. The payoff is effective from February 4, 2020.
The finance minister said the new limit will cover 98.3 per cent of bank accounts and 60.9 per cent of deposits, which is higher than the global average.
Sitharaman said the premium charged for giving
the cover is currently 10 paisa for every Rs 100 of deposits. This is being raised to 12 paisa now and can be changed further up but with the concurrence of the RBI and the finance ministry within a limit.
H.V.R Iyengar, the sixth governor of the RBI who served from March 1, 1957 to February 28, 1962, introduced deposit insurance in 1962, making the country one of the earliest countries to experiment with such a cover.
The government raised the limit five-fold to provide support to the depositors of Punjab and Maharashtra Co-operative (PMC) Bank. Following the collapse of PMC Bank, Yes Bank and Lakshmi Vilas Bank came under stress, leading to the restructuring .
The cover is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the RBI.
LLP changes
The cabinet on Wednesday also cleared amendments to the Limited Liability Partnership (LLP) Act, to decriminalise various provisions under the law and foster the ease of doing business in the country.
The Lok Sabha approved the first batch of supplementary demands authorising the government to spend an additional Rs 23,675 crore, including Rs 17,000 crore on health.
