The government on Monday proposed changes in the DICGC Act to ensure depositors of troubled banks can withdraw their funds of up to Rs 5 lakh.
In the light of lenders like Punjab and Maharashtra Co-operative (PMC) Bank, Yes Bank and Lakshmi Vilas Bank running into trouble in recent times, the government had amended the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, raising the insurance cover on deposit five-fold to Rs 5 lakh.
"I shall be moving amendments to the DICGC Act, 1961 in this Session itself to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover," Finance Minister Nirmala Sitharaman said in her Budget speech.
This would help depositors of banks that are currently under stress, she added.
DICGC, a wholly-owned subsidiary of the Reserve Bank of India, provides insurance cover on bank deposits.
As per the current provisions, the deposit insurance of up to Rs 5 lakh comes into play when the licence of a bank is cancelled and liquidation process starts.
Meanwhile, the Reserve Bank of India (RBI) on Monday said it has cancelled the licence of Shivam Sahakari Bank, Ichalkaranji, Kolhapur, Maharashtra.
The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the lender, it said.
"With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors of Shivam Sahakari Bank Ltd, Ichalkaranji, Kolhapur, Maharashtra as per the DICGC Act, 1961 will be set in motion," RBI said.
The central bank also said that as per the data submitted by the bank, more than 99 per cent of the depositors are fully insured by DICGC.
On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh from the DICGC, subject to provisions, it added.