Deposit Insurance And Credit Guarantee Corporation (DICGC) Bill, 2021.:
The Union Cabinet has cleared the Deposit Insurance and Credit Guarantee Corporation (DICGC) Bill, 2021.
- The failure of banks such as Punjab and Maharashtra Co-operative (PMC) Bank, Yes Bank and Lakshmi Vilas Bank reignited the debate on the low level of insurance against the deposits held by customers in Indian banks.
- Deposit Insurance: It is a protection cover against losses accruing to bank deposits if a bank fails financially and has no money to pay its depositors and has to go in for liquidation.
- Credit Guarantee: It is the guarantee that often provides for a specific remedy to the creditor if his debtor does not return his debt.
- Coverage: The bill will cover 98.3% of depositors and 50.9% of deposit value in the banking system, way above the global level of 80% and 20-30%, respectively.
- It will cover all types of banks, which also include regional rural banks and co-operative banks.
- It will cover banks already under moratorium and those that could come under moratorium.
- Moratorium is a legally authorized period of delay in the performance of a legal obligation or the payment of a debt.
- Insurance Cover: It will provide funds up to Rs 5 lakh to an account holder within 90 days in the event of a bank coming under the moratorium imposed by the Reserve Bank of India (RBI).
- Earlier, account holders had to wait for years till the liquidation or restructuring of a distressed lender to get their deposits that are insured against default.
- The Rs 5-lakh deposit insurance cover was raised from Rs 1 lakh in 2020.
- The Damodaran Committee on ‘Customer Services in Banks’ (2011) had recommended a five-time increase in the cap to Rs. 5 lakh due to rising income levels and increasing size of individual bank deposits.
- Within the first 45 days of the bank being put under moratorium, the DICGC would collect all information relating to deposit accounts. In the next 45 days, it will review the information and repay depositors within a maximum of 90 days.