Stressed PMC Bank customers not to get Rs 5 lakh deposit cover in first lot | Details inside
Customers of stressed Punjab & Maharashtra Co-Operative Bank (PMC Bank) will not get up to Rs 5 lakh insurance cover in the first lot as the multi-state co-operative bank is under the resolution process. Deposit Insurance and Credit Guarantee Corporation (DICGC) in the first lot will pay customers of 20 stressed banks except PMC Bank. For the first lot, the mandatory 90 days period concludes on November 30.
It is to be noted that RBI had in June given in-principle approval to a consortium of Centrum Financial Services and fintech startup BharatPe to acquire the stressed PMC Bank.
Clearing decks for the takeover, the RBI earlier this month gave licence for small finance bank to the consortium.
Recently, the DICGC said there may be a need to invoke the provisions of Section 18 A (7) (a) of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021,
As per the Section 18 A (7) (a) of the Act, if a stressed bank is under the 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 finalising a scheme of amalgamation of the insured bank with other banking institution or a schemeof compromise or arrangement or of reconstruction in respect of such insured bank, and communicates to the Corporation accordingly, the date on which the Corporation shall become liable to pay every depositor of such insured bank may further be extended by a period not exceeding ninety days," it said.
In September 2019, the RBI had superseded the board of PMC Bank and placed it under various regulatory restrictions after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL.
The Reserve Bank of India (RBI) had imposed restrictions on the 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.
Every bank used to pay 10 paise as an insurance premium per Rs 100 of deposit. It was raised to 12 paise per Rs 100 in 2020. It cannot be more than 15 paise at any point in time per Rs 100 deposit.
It is to be noted that the enhanced deposit insurance cover of Rs 5 lakh is effective from February 4, 2020. The increase was done after a gap of 27 years as it has been static since 1993.
(With PTI inputs)
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