Depositors of PMC, 20 other stressed banks to get up to ₹5L in 90 days

“Necessary instructions have been issued to these banks to submit the claims within 45 days after obtaining the willingness of depositors to claim deposit insurance,” DICGC chief general manager VG Venkata Chalapathy said in a statement

Depositors of stressed Punjab and Maharashtra Co-operative (PMC) Bank, and 20 other cooperative banks will soon be able to get their money with a limit up to ₹5 lakh, as Deposit Insurance and Credit Guarantee Corporation (DICGC) has initiated the process to pay their ensured sum within 90 days.

Representational Image. (File photo)

“Necessary instructions have been issued to these banks to submit the claims within 45 days after obtaining the willingness of depositors to claim deposit insurance,” DICGC chief general manager VG Venkata Chalapathy said in a statement.

The move will benefit 20 other such stressed banks besides PMC, which is based in Maharashtra. Of the 20, ten of them are also located in Maharashtra, five in Karnataka, one each in Kerala, Madhya Pradesh, Uttar Pradesh, Punjab and Rajasthan.

Thousands of depositors’ money became inaccessible when PMC Bank was put under moratorium on September 23, 2019, by the Reserve Bank of India (RBI) after the stress of the bank surfaced.

Besides PMC, the banks are -- Adoor Co-Operative Urban Bank, Bidar Mahila Urban Co-Op. Bank, City Co-Operative Bank, Hindu Co-Op. Bank, Kapol Co-Operative Bank, Maratha Sahakari Bank, Millath Co-Operative Bank, Needs of Life Co-Operative Bank, Padmashree Dr. Vithal Rao Vikhe Patil, People’s Co-Operative Bank, Rupee Co-Operative Bank, Shri Anand Coop. Bank, Sikar Urban Co-Op. Bank, Sri Gururaghvendra Sahakara Bank, The Mudhol Co-Operative Bank, Mantha Urban Cooperative Bank, Sarjeraodada Naik Shirala Sahakari Bank, Independence Cooperative Bank, Deccan Urban Co-Operative Bank, and Garha Co-Operative Bank.

The 90-day period to issue insured amount is effective from September 1, 2021, the statement said, giving a detailed timeline. According to it, the verification and settlement of the claims on submission by the banks in the aforesaid list shall be done within the next 45 days by DICGC, which is November 29, 2021.

“These banks shall submit a claim list by October 15, 2021 and update the position as on November 29, 2021 (with principal and interest), in a final updated (second) list, to enable DICGC settle the claim and discharge its insurance liability in full as per norms. Unpaid (updated willingness list)/difference in amount of deposits up to eligible amount (as per final updated list submitted by November 29, 2021) will be paid within 30 days of receipt (i.e., by December 29, 2021),” it said.

At present, DICGC guarantees to pay each depositor a maximum of ₹5 lakh only (including both principal and interest amount) in case of liquidation of a bank even as the account holder may have several lakhs of rupees in his or her account. However, until recently, there was no time limit fixed to complete this process. Through an amendment in the DICGC Act last month, the government made it mandatory for the insurer to complete formalities at the earliest and pay the insured sum to depositors of stressed banks within 90 days.

The amended provision is applicable to all bank deposits -- savings, fixed deposit, current accounts and recurring deposit – and it covers all commercial or cooperative banks whether they are private enterprise or public sector financial institutions. Local area banks, regional rural banks, cooperative banks, small finance banks and payment banks are covered under the legal framework of credit guarantee, a finance ministry official said.

In her Budget speech on February 1, finance minister Nirmala Sitharaman said, “I shall be moving amendments to the DICGC Act, 1961... to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover. This would help depositors of banks that are currently under stress.”