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Rs 1,300 cr paid to those with money stuck in stressed banks, many more to benefit: PM

Modi hands over cheques to beneficiaries of amended deposit insurance Act; amendment to apply retrospectively, says Sitharaman

Written by Karunjit Singh | New Delhi |
December 12, 2021 3:18:37 pm
Prime Minister Narendra Modi. (File)

Prime Minister Narendra Modi on Sunday said that Rs 1,300 crore had been paid to over 1 lakh depositors who could not access their money as their banks faced financial crises, and that another 3 lakh such depositors were set to receive funds stuck in such accounts.

The Centre had amended the Deposit Insurance and Credit Guarantee Corporation Act in August, ensuring that account holders could access their insured deposit amount within 90 days of the arising of such a liability.

“Today is a very important day for the country, the banking sector, and for crores of bank account holders,” the PM said at an event where he personally handed over cheques to cover insured sums to account holders who could not access their funds in distressed banks.

“If a bank is weak or is even about to go bankrupt, depositors will get their money of up to Rs 5 lakh within 90 days,” he said. He underlined that earlier, account holders “could not access their own money for up to 8-10 years after financial stress at banks”.

This, Modi said, would give confidence to depositors and strengthen the banking and financial systems in the country.

The PM noted that deposits worth Rs 76 lakh crore were insured under the DICGC Act, providing full coverage to around 98 per cent of bank accounts.

The RBI had in February 2020 increased the maximum insured amount payable to depositors to Rs 5 lakh up from Rs 1 lakh in the event of a bank not being able to meet its liabilities.

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A number of cooperative banks, including the Punjab and Maharashtra Cooperative Bank, have faced major financial crises leaving depositors in the lurch, who have been unable to withdraw their funds.

Finance Minister Nirmala Sitharaman said the amendment to the DICGC Act had been applied retrospectively to ensure that people who have been waiting for access to their money prior to the amendment could also benefit.

“Normally most of these laws … are applied prospectively from the date when it gets passed… But here we saw that some of the banks were over the years waiting for resolution, and depositors in those banks were also not getting relief. So exceptionally, this time, we have made it applicable retrospectively so that people who have put their money and are waiting for five-six years will also get the benefit,” she said.

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