NEW DELHI: A move which will protect depositors of troubled bank, Union Cabinet on Wednesday approved changes to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, which will allow depositors to withdraw up to Rs 5 lakh in 90 days, even if the bank goes under moratorium.
The Bill provides insurance to all bank deposits and covers all commercial banks and Finance Minister Nirmala Sitharaman said that this will cover 98.3% of all deposit accounts and 50.9% of the deposit value, if a bank goes under moratorium.
“This will be the biggest relief we can offer those small depositors and nearly covering 98.3% depositors,” Sitharaman said in a press conference post the cabinet meeting. She added that this is much above global deposit insurance coverage of 80% for all accounts, and 20-30% coverage by deposit value.
After the bank is placed under moratorium by the Reserve Bank of India, the corporation will process the claims real time, and within 90 days the process will be completed even when the bank resolution is ongoing. This will also cover banks that have been already placed under moratorium.
Banks will have to pay a premium of 12 paise per Rs 100 worth of deposits from 10 paise earlier. The law has a provision that the premium will not be hiked beyond Rs 15 per Rs 100 of deposits. The government on Wednesday also cleared amendments to the Limited Liability Partnership (LLP) Act, with an aim to decriminalise various provisions under the law and foster the ease of doing business.
Changes include removing criminal action for failure to comply with provisions of the Act. It will help about 2.30 lakh such firms in the country. With the approval, the total number of penal provisions in the Act will be reduced to 22, the number of compoundable offences will be only seven, the number of non-compoundable offences will be only three, and the number of defaults will be only 12. “We are doing a lot of changes in the Companies Act and corporate bodies are getting a lot of ease of doing business. LLPs are becoming popular among startups,” Sitharaman said.