Budget 2021: Withdrawing deposits from stressed banks to get simpler

The FM had good news for depositors of stressed or failed banks. Withdrawals are frozen and moratoriums are imposed by the RBI in case a bank fails, thus hurting the life savings of customers. Depositors can now get immediate access to their deposits (fixed deposits, current account and savings) up to the deposit insurance limit, i.e., Rs 5 lakh. This cover is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

Relief for depositors

The move comes as a major relief to bank depositors who earlier could access the DICGC cover amount only if the bank went into liquidation. This meant that even if RBI had imposed a moratorium, depositors had to wait endlessly for the RBI to decide if the bank needs to go for liquidation or not. Only after that decision was taken, could depositors get some money back.

When the RBI had imposed a moratorium on Punjab and Maharashtra Cooperative (PMC) Bank and Yes Bank, several depositors couldn’t access the funds from their accounts. Budget 2021 seeks to help during such situations.

In case your bank goes under the RBI moratorium where you have deposited more than Rs 5 lakh, then you will now get Rs 5 lakh soon. The access to remaining amount will be available after restrictions are lifted by the central bank or when it is liquidated.

Adhil Shetty, CEO, BankBazaar.com says, “This is a positive development and protects depositors from the kind of situations we had seen in the recent past when the RBI had imposed moratorium on banks and limited access to deposits.”

So far, the DICGC cover meant very little to the depositor. There have been no instances recently, wherein a bank has been liquidated and depositors have got the deposit amount from the DICGC. Experts say that RBI typically does not prefer liquidating the bank, especially if it is a large commercial bank.