New Delhi, August 4 (IANS): Depositors with banks and other financial institutions can be reassured as their hard-earned savings will now benefit from improved insurance coverage of Rs 5 lakhs and this money will be provided to them within 90 days, whether the bank is being resolved. or that it undertakes for liquidation.
The 2021 Deposit Insurance and Credit Guarantee Corporation bill received parliamentary approval on Wednesday as the Rajya Sabha passed the law, which has already been approved by the lower house.
The bill proposes to relieve small depositors by providing guarantees on their savings, increasing the amount of insurance on each depositor’s bank deposit to Rs 5 lakh in principal and interest.
The increase in the insured amount from Rs 1 lakh to Rs 5 lakh will cover 98.3% of all deposit accounts and 50.9% of the value of deposits. This is higher than the coverage provided internationally, i.e. around 80 percent of deposit accounts and 20-30 percent of the value of deposits.
The amount guaranteed under the Act will be available to depositors of all banks and financial institutions, including sectors where the bank has been subject to a moratorium.
In addition, the new legislation will provide a time-limited process to clear the insured deposit amount. This will need to be settled within 90 days, whether the bank is in resolution or liquidation.
Various definitions have also been changed in the new bill to cover a larger portion of depositors under the deposit insurance program.
The premium charged by banks to provide this coverage is currently 10 paisa for every Rs 100 of deposits. This amount has been increased to 12 paisa now and can be changed later, but with the agreement of the RBI and the Ministry of Finance within a certain limit.