In a move which will provide relief to depositors of troubled banks, the Union Cabinet on Wednesday cleared amendments in the Deposit Insurance Credit Guarantee Corporation (DICGC) Act 1961, under which account holders of the affected bank will get up to Rs 5 lakh within 90 days of its collapse.
The Union Cabinet has cleared the DICGC Bill 2021, Finance Minister Nirmala Sitharaman told media persons after the cabinet meeting.
The proposed legislation provides insurance to all bank deposits and covers all commercial banks, Ms Sitharaman told reporters. She added that even foreign bank branches in India are covered under it.
Under the legislation, bank deposits up to Rs 5 lakh will be insured in each bank (inclusive of both principal as well as interest, Ms Sitharaman said, adding that 98.3 percent of bank accounts would be fully protected.
“Normally, it takes around eight to 10 years after complete liquidation to get money under insurance; but now, even if there is a moratorium, within 90 days, the process will definitely be completed, giving relief to depositors, the Finance Minister said.
The amendment to the DICGC Act, 1961 had been announced in the Union Budget by Ms Sitharaman, where she had said that an increase in insurance cover on bank deposits to Rs 5 from Rs 1 lakh will be made effective, in case a bank faces liquidation.