Finance Minister Nirmala Sitharaman on Wednesday announced that the Union Cabinet had cleared the amendment to the Deposit Insurance Credit Guarantee Corporation (DICGC) Bill, 2021, which would provide account-holders an amount of up to Rs 5 lakh within 90 days of a bank failure. 

The DICGC Bill insured all bank deposits and covered all commercial banks, the minister said, adding that even foreign bank branches in India were covered under it. 

Under the DICGC, each depositor’s bank deposit was insured up to Rs 5 lakh in each bank (for both principal and interest). The increase of insured amount from Rs 1 lakh to Rs 5 lakh would cover 98.3 per cent of all deposit accounts and 50.9 per cent of deposit value, Ms Sitharaman noted.

“Normally, it takes 8-10 years after complete liquidation to get money under insurance; but now, even if there is a moratorium, within 90 days, the process will definitely be completed, giving relief to depositors,” the finance minister said.

The amendment to the DICGC Bill, 1961 was announced by the finance minister in the Union Budget 2021-22 presented by her in February. 

The government had last year raised insurance cover on bank deposits by five-folds to Rs 5 lakh to provide support to depositors of struggling lenders, like Punjab and Maharashtra Co-operative (PMC) Bank. Following the collapse of PMC Bank, private sector lender Yes Bank and Lakshmi Vilas Bank too came under stress, leading to restructuring by the regulator and the government.