DICGC to authenticate deposit claims of failed bank in 30 days

The Deposit Insurance and Credit Corporation will get 30 days to authenticate claims of depositors of a failed bank after it receives a list of outstanding deposits from the lender. 

According to the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 passed by Rajya Sabha Wednesday, depositors of a stressed bank, put under moratorium, will be able to withdraw up to Rs 5 lakhs within 90 days.

Once a stressed bank is put on moratorium, DICGC will be liable to pay depositors an insured amount of Rs 5 lakh. A list showing the outstanding deposits of each depositor of the insured bank will have to be furnished by the lender within 45 days. 

The DICGC, within 30 days of receiving the list will have to verify the authenticity of the claims made, and ascertain the willingness of each depositor to receive the amount due to him, out of his deposit in the insured bank. The entire process, from the time a bank is placed under moratorium to depositors receiving the insured amount, should not exceed 90 days, according to the DICGC Bill, 2021.

The bill also amends Section 15 of the DICGC Act to enable the corporation to increase the ceiling on the amount of premium paid by banks to DICGC to 15 paisa per annum for Rs 100 worth deposits, with the prior approval of the Reserve Bank of India (RBI). 

The amendments also allows the corporation to impose penal interest for the amount to be repaid by the liquidator. According to Section 21(2)(a) of DICGC Act, liquidator is bound to repay the Corporation for the amount paid by it or provided for in case the depositors are not traceable. “Given the paucity of time for liquidator to draw up claims and secure liquid funds, the proposed amendments to the Act provide flexibility to the liquidator to seek deferment for such repayment to the Corporation for the period as may be decided by the board of directors of DICGC," said Nischal S Arora, partner at Nangia Andersen. 

In case of further delay beyond the time stipulated by the Board, the Corporation may charge penal interest at a maximum rate of 2 per cent above the repo rate per annum, for the amount to be repaid by the liquidator to the Corporation. 

"There was no mechanism to impose a penalty under the earlier law in case of a default in repayment,” Arora said.