Government and Reserve Bank of India (RBI) are working on allowing depositors to withdraw up to ₹5 lakh insured amount from the bank which is under direction.
At present, when a bank is placed under directions, deposit withdrawals are capped – it ranges from ₹1,000 to ₹1 lakh of the total balance held by a depositor. This withdrawal cap is applicable for the entire period that a bank is under directions.
Depositors of Urban Co-operative Banks (UCBs) that are under directions may not have to sweat it out to get back their savings up to the ₹5 lakh insured amount, going by the amendments being considered to the Deposit Insurance and Credit Guarantee Act (DICGC), 1961.
The government and the RBI are believed to be examining the feasibility of allowing depositors of banks, especially UCBs, under regulatory directions, to withdraw up to the ₹5 lakh insured amount to alleviate their misery.
Given that depositors of UCBs under directions are finding it difficult to get by due to the severe restrictions on withdrawal of their savings, the Finance Ministry and the RBI seem to be wanting to address this issue by allowing withdrawal up to the insured amount of ₹5 lakh, according to bankers in the co-operative sector.
The possibility of allowing deposit withdrawal up to the insured amount has brightened with the Deposit Insurance Fund (DIF) swelling to ₹1,10,380 crore at March-end 2020 from ₹93,750 crore at March-end 2019. Further, following the deposit insurance limit being hiked to ₹5 lakh with effect from February 4, 2020, the deposit insurance premium rate per ₹100 deposit has also been increased to ₹0.12 (or 12 paise) with effect from April 1, 2020 against ₹0.10 (10 paise) earlier.
Of the total claims settled by DICGC since inception, around 94.3 per cent of claims pertained to co-operative banks that were liquidated, amalgamated or restructured.
Input: The Hindu