Progress of quilting: the Hindu editorial on the reimbursement of insured bank deposits

The government is hoping to make further changes to the 1961 Deposit Insurance and Credit Guarantee Corporation Act during the monsoon session, after Cabinet nodded this week. From a savers perspective, the most important change on the anvil is a 90-day deadline for the Corporation (DICGC) to remit insured customers’ deposits to troubled banks. According to the plan, once the RBI places restrictions on a bank, the countdown will begin and on or so day 91, account holders will collect their outstanding balance with a cap of 5 lakh. While Finance Minister Nirmala Sitharaman said this would not apply in retrospect, she indicated it would apply to cases of lenders already under moratorium. Over the past two years, Yes Bank, Lakshmi Vilas Bank and PMC Bank have faced such a ban on depositors seeking to opt out. PMC’s bank accounts still face such restrictions, even as savings parked in other failed cooperative lenders continue to elude their rightful owners. The minister said it normally takes eight to ten years for insured deposits to be paid, once a bank hits a roadblock and a myriad of conditions are placed on withdrawals. But these delays were also well known last year, when the insured deposit amount was increased to ₹ 5 lakh from ₹ 1 lakh fixed in 1993.

Making incremental changes in quick succession suggests a piecemeal approach to governance rather than a system-wide view, although the government has emphasized that it has been working “overtime” to resolve the PMC crisis. Bank. Nonetheless, given the growing distress of households and the declining momentum in savings levels due to the pandemic, this change must be able to weather the din of Parliament. According to RBI data 76.21 lakh crore or almost 51% of deposits are now insured, but 98.3% of all accounts have balances of ₹ 5 lakh or less, so they are fully insured. This can be a source of renewed comfort for people in the banking system, struggling with bad debts, declining deposits and a still nascent insolvency framework. It is important for financial stability that people feel it is safer to park their money in a bank than to hide it under a mattress. For many people with limited financial literacy and limited access to retirement savings instruments, with lifetime incomes (maybe more than 5 lakh) parked in a neighborhood cooperative bank, this would still be a far cry from the bottom line. be perfect. The RBI needs to step up its watchdog game, and the Center, which recently made the Cooperation Department a full-fledged ministry, must allow it to do so. In addition, just as the latest amendments include a provision to increase the premium paid by banks to DICGC in the future, there should have been one to increase the limit of insured deposits in line with inflation and changes in per capita income.

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