Depositors of failed banks will get only upto Rs 1 lakh insurance cover: RBI-owned subsidiary
New Delhi, Dec 03: Depositors in failed and liquidated banks will get only up to Rs 1 lakh as insurance cover, regardless of the amount in their accounts, according to the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the Reserve Bank of India.
This covers savings, fixed, current and recurring accounts, the DICGC, which insures all bank deposits, said in response to a Right to Information (RTI) query filed by PTI.
"Under the provisions of Section 16 (1) of the DICGC Act, 1961, if a bank fails/gets liquidated, the DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit up to Rs one lakh as insurance cover, for both principal and interest amount held by him in the same right and same capacity at all the branches of a bank taken together," it said.
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Asked whether there is any proposal or move under consideration to raise the limit of Rs 1 lakh insured in the bank in wake of the recent PMC Bank fraud, the DICGC said, "The corporation does not have the requisite information."
The
corporation
covers
all
commercial
banks,
including
branches
of
foreign
banks
functioning
in
India,
local
area
banks
and
regional
rural
banks.
All
eligible
cooperative
banks
as
defined
in
Section
2(gg)
of
the
DICGC
Act
are
also
covered
by
the
deposit
insurance
scheme.
"Each depositor in a bank is insured up to a maximum of Rs one lakh as on the date of liquidation/cancellation of bank's license or the date on which the scheme of amalgamation/merger/reconstruction comes into force," the DICGC said.
The
response
assumes
significance
with
numerous
instances
of
different
banks
becoming
victim
of
frauds,
putting
at
risk
the
savings
of
people.
On
September
24,
the
RBI
imposed
operational
curbs
on
Maharashtra-based
PMC
Bank
and
appointed
an
administrator
following
the
detection
of
alleged
financial
irregularities.
According to the Mumbai Police's Economic Offences Wing (EOW), the PMC Bank management, allegedly in cahoots with a business family, concealed huge loan defaults by HDIL group firms from banking regulators.
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Over
70
per
cent
of
the
bank's
advances
went
to
HDIL
group,
which
led
to
a
huge
crisis
when
the
realty
group
defaulted
on
repayment,
the
EOW
said.
Government
owned
banks
have
reported
frauds
of
over
Rs
95,700
crore
in
the
first
six
months
of
the
current
fiscal.
"According to Reserve Bank of India (RBI), frauds as per year of reporting, as reported by Public Sector Banks (PSBs), during the period from April 1, 2019 to September 30, 2019 is 5,743 involving a total amount of Rs 95,760.49 crore," Finance Minister Nirmala Sitharaman said in the Rajya Sabha last month.