Big Banking Update! Depositors of 16 stressed banks to get up to Rs 5 lakh on Monday

New Delhi: Customers of 16 stressed cooperative banks will get up to Rs 5 lakh deposit insurance cover on Monday by Reserve Bank of India's subsidiary DICGC as part of its mandate under a new law.

The Deposit Insurance and Credit Guarantee Corporation (DICGC) had earlier prepared a list of 21 banks but five, including Punjab & Maharashtra Co-Operative Bank (PMC Bank), are out of the list as they are either in merger process or out of the moratorium.

Parliament in August passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing a moratorium on the banks.

Following enactment, the government has notified September 1, 2021 as the date on which the provisions of the Act would come into force. The mandated 90 days from the notified date comes to an end on November 29, 2021.

The depositors of these banks, who have not yet submitted their claims, are advised to contact the respective banks, a public notice from DICGC said.

"The claims should be supported by officially valid documents of identity and written consent to receive the amount lying in credit of their deposit account (willingness declaration) subject to a maximum of Rs 5 lakh along with alternate bank account details into which the said amount may be credited," it said.

Depositors submitting valid documents, as mentioned above, will be paid by credit to the alternate bank account specified by depositors or on their consent, to their Aadhaar linked bank account, it said.

For the second phase, the last date for submission of documents is December 10, 2021 while date of payment is December 31, 2021, it added.

Besides PMC Bank, depositors of Hindu Co-Op Bank Ltd, Pathankot of Punjab, Rupee Co-Operative Bank Ltd and Needs Of Life Co-Operative Bank Ltd from Maharashtra and Bidar Mahila Urban Co-Op Bank Ltd of Karnataka are out of this.

It is to be noted that the RBI had in June given in-principle approval to a consortium of Centrum Financial Services and fintech startup BharatPe to acquire the stressed PMC Bank.

Clearing decks for the takeover, the RBI in October gave licence for small finance bank to the consortium. Recently, the DICGC said there may be a need to invoke the provisions of Section 18 A (7) (a) of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021.

As per the Section 18 A (7) (a) of the Act, if a stressed bank is under the resolution process, the period for disbursement of Rs 5 lakh can be further extended by 90 days.

Last year, the government increased the insurance cover on deposits by five times to Rs 5 lakh. The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020.

Every bank used to pay 10 paise as an insurance premium per Rs 100 of deposit. It was raised to 12 paise per Rs 100 in 2020. It cannot be more than 15 paise at any point in time per Rs 100 deposit. Also Read: Coinstore cryptocurrency exchange enters India despite pending curbs on trade

It is to be noted that the enhanced deposit insurance cover of Rs 5 lakh is effective from February 4, 2020. The increase was done after a gap of 27 years as it has been static since 1993. Also Read: Post Office Scheme: Open account with just Rs 1000; option to get Rs 14 lakh in 5 years