Rajya Sabha on Wednesday passed a bill that seeks to ensure account holders of banks coming under moratorium will get up to Rs 5 lakh within 90 days of imposing the moratorium from the Deposit Insurance and Credit Guarantee Corporation (DICGC). The bill was passed with a voice vote amid uproar by Opposition parties over various issues, including Pegasus snooping row and new farm laws.
Replying to a brief debate on the DICGC (Amendment) Bill, 2021, Finance Minister Nirmala Sitharaman said the legislation will benefit the small depositors, including those of the PMC Bank. The benefits will also accrue to the depositors of 23 cooperative banks, which are in financial stress and on which RBI has imposed some restrictions, she said.
The interest of the small depositors will have to be kept in mind for whom Prime Minister Narendra Modi has increased the insurance amount from Rs 1 lakh to Rs 5 lakh, and within 90 days of the moratorium being applied and also for all those who are already under stress, this money will be available, the minister said. "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?," she said amid the din.
The minister also accused the Opposition of disrupting the House proceedings and not participating in the discussion of important bills. Referring to the protests against the farm laws, Sitharaman said Agriculture Minister Narendra Singh Tomar is willing to talk on the issue but the Opposition was not willing for discussions.
"... this shows they are not interested in a solution and they only want to raise the issue here as an excuse for not participating or allowing others to participate in the discussion which is really a sad day for us," she said. Once the bill becomes law, it will provide immediate relief to lakhs of depositors, whose money is 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 license 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.
At present, it takes 8-10 years for depositors of a stressed bank to get their insured money and other claims. Though RBI and the central government keep monitoring the health of all banks, there have been numerous recent cases of banks, especially cooperative banks, being unable to fulfil their obligations towards depositors due to the imposition of moratorium by RBI.
Last year, the government increased insurance cover on deposits by five times to Rs 5 lakh. The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020. In September 2019, RBI superseded the board of PMC Bank and imposed various regulatory restrictions after financial irregularities came to light.