Hyderabad: In the wake of the Deposit Insurance and Credit Guarantee Corporation (Amendment ) Bill, 2021 passed in the Rajya Sabha on August 4 and to be introduced in the Lok Sabha, All India Bank Employees Association (AIBEA) on Monday urged Finance Minister Nirmala Sitharaman to reconsider it.
Due to the collapse of Punjab and Maharashtra Cooperative (PMC) Bank and the sufferings of the depositors, instead of taking tough action on the culprits in the management of the Bank for their misdeeds and also taking action on RBI officials for their lapse in monitoring the activities of this Bank, the Government has decided to increase the Deposit Insurance cover from Rs. 1 lakh to Rs 5 lakh.
On the face of it, the intention appears to be good and welcome. However, the Central Government needs to revisit the Bill, before it is considered by the Lok Sabha, AIBEA General Secretary Ch Venkatachalam said in a letter to Sitharaman.
The Union Cabinet had earlier approved the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that depositors get up to Rs 5 lakh of their deposits within 90 days of a bank coming under RBI moratorium.
Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the Reserve Bank of India, provides insurance cover on bank deposits.
Deposit insurance coverage will be enhanced from Rs 1 lakh to 5 lakh per depositor, the Finance Minister said in her Budget speech in Lok Sabha in February this year.
At present, the DICGC provides Rs 1 lakh insurance to a depositor regardless of deposit in case the lender fails or is liquidated.
This is the first time since 1993 that the deposit insurance cover has been raised, Ms Nirmala then added.
Venkatachalam said we refer to the proposal of the Government to increase the Deposit Insurance coverage from the existing Rs. 1 lakh to Rs. 5 lakh as was announced in the Budget in the wake of the happenings in PMC Bank in Mumbai where the Bank has been put under moratorium and the customers find it difficult to withdraw their own money.
He said even though, in the wake of large-scale collapse and failure of many Banks in the late 1940s, particularly in Bengal and Kerala, the idea of introducing some insurance benefit for the Deposits of the customers was thought about, it was being delayed in order to build up proper inspection process by RBI.
However, after the crash of Palai Central Bank Limited and Laxmi Bank Limited, in 1960, the urgency was felt and the Government introduced the Deposit Insurance Corporation Bill, 1961 and the same was approved by the Parliament in December 1961. Accordingly, the Deposit Insurance Corporation Act came into being with effect from January 1, 1962.
The top union leader said we are very proud to record that this issue was taken by its leader Prabhat Kar in Parliament who was the General Secretary of All India Bank Employees Association and who was also a member of Lok Sabha from 1957.
In fact, on September 7, 1961, when the Bill was introduced in the Lok Sabha, Kar made very important observations during his intervention and lengthy, detailed speech. At that time, the Government proposed was to cover the Bank Deposits upto Rs. 1500 and the AIBEA leader argued that the coverage limit be increased to Rs. 3000.
To begin with, only commercial banks were covered by the Act. Later, Cooperative Banks, Regional Rural Banks, Primary Agri Societies were also extended for coverage.
To begin with, the insurance cover against Bank Deposits were up to Rs. 1,500. In 1968, it was enhanced to Rs. 5000, in 1970 to Rs. 10,000, in 1976 to Rs. 20,000, in 1980 to Rs. 30,000 and in the year 1993, the cover was enhanced to Rs. One lakh.
Similarly, he said the premium payable for the Insurance of the Deposits was at 0.05 paise per Rs. 100 per year and in 1971 it was revised at 0.04 paise, increased to 0.05 paise in 1963, 0.08 paise in 2004 and to 0.10 paise in 2005. Now it is 0.12 paise per Rs. 100 from April 1, 2020, Mr Venkatachalam said.
