The finance ministry has clarified that the fresh amendments to the deposit insurance law or the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act will cover PMC Bank customers.
Although the law says deposits up to Rs 5 lakh are to be paid in 90 days of a bank moratorium, the government has introduced a new section stating the payment will also be applicable for lenders where suspension of business is already in force, thus covering the PMC Bank depositors. PMC Bank has been under RBI restrictions since September 2019.
According to Finance Minister Nirmala Sitharaman, "The cause of continuing concern is that when various restrictions, including moratorium, are imposed on a bank by the Reserve Bank of India, genuine depositors continue to face serious difficulties in accessing their deposits, despite deposit insurance being in place, and this may continue for extended periods of time.”
The Bill says, “Any direction, prohibition, order or scheme under any of the provisions of the Banking Regulation Act, 1949 providing for suspension of business of the insured bank is already in force as on the date of commencement of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021;… The Corporation shall become liable to pay to each depositor of such insured bank..."
The amendment also proposes giving the deposit insurance corporation another 90 days to pay the depositors incase the RBI has proposed a restructuring/amalgamation scheme for a failed bank and the same has been communicated to the DICGC by the central bank.
The amendment says, "...In cases where the Reserve Bank finds it expedient in the interest of finalising a scheme of amalgamation of the insured bank with other banking institution or a scheme of compromise or arrangement or of reconstruction in respect of such insured bank, and communicates to the Corporation accordingly, the date on which the Corporation shall become liable to pay every depositor of such insured bank may further be extended by a period not exceeding ninety days.”
The government aims to pass the DICGC Bill in the ongoing monsoon session.
Last month the RBI extended the restrictions on PMC Bank till December 2021, with the withdrawal limit continuing to be capped at Rs 1 lakh.
The amendments also provide time to banks to repay the insurance claimed against the bank deposits to the Deposit Insurance Corporation and the time limit for repayments can be decided by the bank board.