As per the finance ministry notification issued on August 27, “In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September 2021, as the date on which the provisions of the said Act shall come into force.”
Even depositors of banks that are already under moratorium by the RBI before the amendments were made will be eligible to get their money back within 90 days from September 1, 2021 i.e., by November 30, 2021.
As per the RBI website, some of the banks that are currently under moratorium are Garha Co-operative Bank Ltd., Guna, Madhya Pradesh, Deccan Urban Co-operative Bank Limited, Vijayapura, Karnataka, Independence Co-operative Bank Ltd, Nashik, Maharashtra etc.
Recently, the government announced that depositors of failed or stressed banks that are placed under a moratorium by the central bank will be able to get their deposits back (up to Rs 5 lakh) back within 90 days from the start of the moratorium. The amendments in the DICGC Act was passed by the parliament in its Monsoon Session in August 2021.
How will depositors get their money back?
As explained by Finance Minister Nirmala Sitharaman, the 90-day period will be divided into two periods of 45 days. “The stressed bank on whom restriction is placed is expected to collate all information regarding the number of claimants and claim amount and inform DICGC about it within the first 45 days. Within the next 45 days, DICGC is mandated to process the claim and make payment to each eligible depositor,” finance minister Nirmala Sitharaman said during the press briefing on July 28, 2021.
“Normally, it takes 8 – 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 FM said in the press briefing on July 28, 2021.
The overall insurance amount of Rs 5 lakh includes both principal and interest held with the bank in the same right and capacity. This move is expected to cover around 98.3% of the total number of accounts and 50.9% of the value of total deposits held with the banks, the FM stated in the press briefing.
Deposits with all banks are covered under DICGC insurance cover of Rs 5 lakh; earlier many cooperative banks were not included in this coverage. However, in 2020 the government introduced an amendment in Banking Regulation Act where RBI was given complete regulatory control over cooperative banks and all banks were put under deposit insurance coverage.