In a move that seeks to protect depositors, the Union Cabinet on Wednesday approved an amendment to a law to provide a bank account holder access to up to Rs 5 lakh funds within 90 days of the bank’s failure.
The Centre will try to get the amendments to the Deposit Insurance and Credit Guarantee Corporation Act law passed by Parliament in the current session.
The proposed amendments will eliminate the problem that customers face in accessing their deposits if a bank is under RBI's moratorium. At present, there is a long wait, pending resolution or liquidation of the bank.
Once the Bill becomes law, it will provide immediate relief to thousands of depositors, who had their money parked in stressed lenders such as PMC Bank and other small cooperative banks.
"There will be no waiting for the eventual liquidation, or even for the eventual resolution," Finance Minister Nirmala Sitharaman said, briefing reporters on the Cabinet decision.
The amendments will apply to all banks operating in India including commercial banks, regional rural banks and cooperative banks, she said.
Sitharaman said in the past depositors would get their insurance money 8-10 years after liquidation or around 3-4 years in case of bank takeover.
"Even if there is a moratorium on a bank which means everything is frozen and depositors are not able to take their money out of their accounts, they will be able to get the insurance,” she said.
Published 28 July 2021, 11:24 IST
