Bill allows deposit insurance interim payments during bank moratoriums

This Bill amends the Deposit Insurance and Credit Guarantee Corporation Act, 1961 to ensure depositors can access their insured money through interim payments by the Corporation when a bank is under restrictions (like a moratorium) imposed by the Reserve Bank of India. It also allows the Corporation to raise premium limits and charge penal interest for delayed repayments by banks.

Who it concerns: The Bill affects the Deposit Insurance and Credit Guarantee Corporation (DICGC), insured banks (including banking companies and co-operative banks), depositors of these banks, and the Reserve Bank of India (RBI).

What the bill does

• Inserts a new Section 18A requiring the Corporation to make interim payments to depositors if a bank is subject to directions, prohibitions, orders, or schemes under the Banking Regulation Act, 1949 that restrict access to deposits.
• Mandates that the insured bank must provide a list of outstanding deposits within 45 days of the restriction taking effect, certified by the bank's chief executive officer.
• Requires the Corporation to verify claims and pay depositors within a total period not exceeding 90 days from the date it becomes liable to pay, subject to specific extensions.
• Amends Section 15 to allow the Corporation to raise the premium limit (currently 15 paisa per annum per hundred rupees) with the previous approval of the Reserve Bank of India.
• Amends Section 21 to allow the Corporation to defer or vary repayment time limits from insured banks and to charge penal interest at a maximum rate of 2% above the repo rate for delayed repayments.
• Amends definitions of 'defunct banking company' and 'defunct co-operative bank' to include cases where directions, prohibitions, orders, or schemes under Section 18A are issued.

Also in the document

• The Bill is an amendment to the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
• It provides for interim payments to depositors in cases where banks are unable to fulfill obligations due to restrictions like moratoriums, addressing difficulties faced by depositors in recent cases involving cooperative banks.
• The Financial Memorandum states that the provisions do not involve any expenditure of recurring or non-recurring nature from the Consolidated Fund of India.
• The Bill empowers the Board to make regulations regarding the deferral of repayments and prudential principles for assessing bank repayment capability.