Recently the Union cabinet has cleared the Deposit Insurance and Credit Guarantee Corporation (DICGC) Bill, 2021, which provides for enhanced protection for bank deposits in case of failure of a bank. And it has been introduced in the Rajya Sabha. If it becomes law, depositors will be able to withdraw up to Rs 5 lakh in 90 days after the Reserve Bank of India imposes curbs on banks on detection of irregularities. The government had increased the deposit cover from Rs 1 lakh to Rs 5 lakh last year. The case for increasing the cover became strong after the collapse of some banks like PMC Bank and Lakshmi Vilas Bank in the recent past.
The new law provides for submission of claims by depositors within 45 days of the declaration of moratorium and review and settlement of the claim within the next 45 days. This measure will give relief to the victims of bank failures and some confidence to those who keep their money in banks. But the RBI needs to strengthen its regulatory oversight and prevent the collapse of banks.
