Deepali Kalia –
Published on August 05, 2021, at 12:49 PM
On 4th August, Rajya Sabha passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 after a short debate and despite protests from the Opposition.
Finance Minister Nirmala Sitharaman stated that the legislation will prove to be beneficial for small depositors including those of Punjab and Maharashtra Co-operative (PMC) Bank.
The PMC Bank is for the time being under reconstruction as the multi-state cooperative bank was hit by fraud and thousands of its depositors are facing hardship as a result.
The Bill will also prove to be beneficial to the depositors of about twenty-three cooperative banks, currently, under financial stress and on whom the Reserve Bank of India (RBI) has imposed certain restrictions, the Finance Minister added.
“This is a very important bill, which will benefit small depositors who have been waiting for a very long time… PMC Bank is a classic example, they have been waiting… should they not get deposit insurance?” The Finance Minister said.
Even if a bank for some duration due to restrictions such as moratorium is unable to fulfil its obligations, the Bill allows depositors to access their deposits to the scope of the deposit insurance cover through interim payments by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
For this, the Bill has sought the addition of a new section in the Deposit Insurance and Credit Guarantee Corporation, 1961.
DICGC is a fully-owned subsidiary of the RBI and provides insurance cover on bank deposits. The insurance cover on deposits was increased by the government, last year by 5 times to Rs 5 lakh.
In addition, the Bill also provides that DICGC may defer or change the receipt of repayments that are due to it from the insured banks.
Besides that, DICGC has also been empowered to charge penal interests in cases where repayments by the banks are delayed.
Despite monitoring of the health of the banks by RBI and Centre, in recent times, numerous banks, especially cooperative banks have been unable to fulfil their obligations toward their depositors because of the imposition of a moratorium by RBI.
Click here to Download the Deposit Insurance and Credit Guarantee Corporation(Amendment) Bill, 2021
Also read: What is Insolvency Bankruptcy Code (Amendment) Bill, 2021?