PMC Bank customers will not get a deposit cover of Rs 5 lakh in the first lot. details inside
Customers of crisis-hit Punjab and Maharashtra Co-operative Bank (PMC Bank) will not get insurance cover of up to Rs 5 lakh in the first lot as the multi-state cooperative bank is under resolution process. The Deposit Insurance and Credit Guarantee Corporation (DICGC) will pay the customers of 20 stressed banks, excluding PMC Bank, in the first lot. The mandatory period of 90 days for the first lot ends on November 30.
It is to be noted that the RBI in June gave in-principle approval to a consortium of Centrum Financial Services and fintech startup BharatPe to acquire the stressed PMC Bank.
Clearing decks for the acquisition, the RBI had earlier this month granted license to the consortium to small finance banks.
Recently, the DICGC said that the provisions of Section 18A (7) (a) of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 may need to be invoked.
As per section 18A(7)(a) of the Act, if a stressed bank is under resolution process, the period for disbursement of Rs 5 lakh can be further extended by 90 days.
“The Reserve Bank finds it expedient in the interest of finalizing the scheme of amalgamation of the insured bank with any other banking institution or any scheme
Settlement or arrangement or reconstruction in respect of such insured bank, and informs the Corporation accordingly, for a further period not exceeding ninety days from the date on which the Corporation shall be liable to pay to every depositor of such insured bank can be increased,” it said.
In September 2019, the RBI superseded the board of PMC Bank and placed it under various regulatory restrictions after it detected certain financial irregularities, concealment of loans given to real estate developer HDIL and misreporting.
The Reserve Bank of India (RBI) had put restrictions on withdrawal of deposits from these stressed banks. Of the 20 banks, 10 are from Maharashtra, five from Karnataka and one each from Uttar Pradesh, Kerala, Rajasthan, Madhya Pradesh and Punjab.
Last year, the government increased the insurance cover on deposits by five times to Rs 5 lakh. The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020.
Each bank used to pay 10 paise as insurance premium for every Rs 100 deposited. It was increased to 12 paise per 100 rupees in 2020. It cannot exceed 15 paise per Rs 100 deposit at any point of time.
It is to be noted that the enhanced deposit insurance cover of Rs 5 lakh is effective from February 4, 2020. The increase was made after a gap of 27 years as it has been stable since 1993.
(with PTI inputs)
Read also:Government extended the tenure of RBI Governor Shaktikanta Das by 3 years
.