According to Deposit Insurance and Credit Guarantee Corporation (DICGC) a wholly owned subsidiary of Reserve Bank of India if a bank fails and liquidates then depositors will only get up to Rs 1 lakh as insurance cover irrespective of the amount held by them in their accounts. DICGC has given this information while replying to RTI query. The amount covers savings, fixed, current and recurring accounts said DICGC.
“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.
Nishan Poojari a private bank employee said, “Average ticket size of deposits at scheduled commercial bank is increasing, to protect the interest of depositors, deposit insurance should be increased with low or marginal cost to depositors.”
The mentioned amount of 1 lakh will be applicable for all types of account. As a result of this Mumbaikars are worried that if the bank in which they hold deposits fails and get liquidated then they will lose their hard earned money and will only get Rs 1 lakh as insurance cover. Already we have seen the hardships faced by PMC bank depositors who were unable to withdraw their hard earned money after the detection of alleged financial irregularities by the bank. Many people have deposited more than 5 to 10 lakh rupees in their account. If people keep lumpsum money at home then there is a possibility of income tax raid. People nowadays save lumpsum money for meeting future needs like retirement, education and marriage.
For instance if a customer has deposited Rs 15 lakh in a bank and if the bank fails then he will only receive an insurance cover of Rs 1 lakh whereas no guarantee is offered on the remaining 14 lakhs by the bank. After the alleged irregularities in PMC bank customers are worried about their money. RBI’s rule is applicable to all banks. It also includes foreign banks whom the RBI has granted licence to carry on their business. However, no government owned bank or private bank has failed and liquidated in India. Even if a bank goes bankrupt RBI and government takes necessary steps to protect the interest of depositors.
When 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.”
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. 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.
By Suraj Chandran