Having more than Rs 1 lakh in a bank account? Then this article is important to you. After Reserve Bank of India (RBI) put restrictions on PMC Bank depositors, “Is my money safe with banks?, “Is keeping money in the bank in savings/deposit account akin to lending to a bank? “Why is my deposit amount not fully covered by insurance?”, are some of the queries that keep rising. Finally, a wholly-owned subsidiary of the Reserve Bank of India, DICGC, has issued a statement clearing ‘how much amount in the bank accounts are insured.’
According to the Deposit Insurance and Credit Guarantee Corporation (DICGC), depositors in failed and liquidated banks will get only up to Rs 1 lakh as insurance cover.
This covers savings, fixed, current and recurring accounts, the DICGC, which insures all bank deposits, said in response to a Right to Information (RTI) query filed by PTI.
“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.
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.”
The corporation covers all commercial banks, including branches of foreign banks functioning in India, local area banks and regional rural banks.
All eligible cooperative banks as defined in Section 2(gg) of the DICGC Act are also covered by the deposit insurance scheme.
“Each depositor in a bank is insured up to a maximum of Rs one lakh as on the date of liquidation/cancellation of bank’s license or the date on which the scheme of amalgamation/merger/reconstruction comes into force,” the DICGC said.
The response assumes significance with numerous instances of different banks becoming victim of frauds, putting at risk the savings of people.
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.
“According to Reserve Bank of India (RBI), frauds as per year of reporting, as reported by Public Sector Banks (PSBs), during the period from April 1, 2019 to September 30, 2019 is 5,743 involving a total amount of Rs 95,760.49 crore,” Finance Minister Nirmala Sitharaman said in the Rajya Sabha last month.