The depositors of two Maharashtra-based co-operative banks will get paid their insurance cover of up to Rs 5 lakh on their deposits by the Deposit Insurance and Credit Guarantee Corporation (DICGC) next month.

Shankarrao Pujari Nutan Sahakari Bank, Ichalkaranji, and Harihareshwar Sahakari Bank, Wai, were pulled up by the Reserve Bank of India (RBI) for their deteriorating financial positions. The regulator had imposed several restrictions, including on withdrawals by depositors, on these two co-operative banks in May.

Eligible depositors of Shankarrao Pujari Nutan Sahakari Bank will get the payment on August 10, and those of Harihareshwar Sahakari Bank on August 28, according to a DICGC circular. DICGC, a wholly-owned subsidiary of the RBI, provides an insurance cover of up to Rs 5 lakh on bank deposits.

Depositors of the two Maharashtra-based banks will get the amount credited to the alternate bank account specified by them, or on their consent, to their Aadhaar-linked bank accounts.

While imposing several restrictions on Shankarrao Pujari Nutan Sahakari Bank, the RBI had said that 99.84% of the depositors are fully covered by the DICGC insurance scheme.

In case of Harihareshwar Sahakari Bank, 99.59% are fully covered by the DICGC insurance scheme, the RBI had said.

Deposit insurance extended by the DICGC covers all commercial banks, including local area banks and regional rural banks as well as co-operative banks in all the states and UTs.

As at end-March 2022, the limit of deposit insurance at Rs 5 lakh fully protected 256.7 crore deposit accounts (97.9% of total). In value terms, the insured deposits of Rs 81 lakh crore formed 49% of the total assessable deposits.

DICGC settled aggregate claims of Rs 8,516.6 crore under different channels during 2021-22.

The entity has been extending insurance cover to depositors with the objective of maintaining the confidence of small depositors in the banking system of the country and promoting financial stability.

The Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, passed by Parliament in 2021, made significant changes in the landscape of deposit insurance in India.

Under the Act, the Corporation is liable to pay the insured deposit amount to depositors of an insured bank. Such liability may arise when an insured bank undergoes liquidation, reconstruction or any other arrangement under a scheme, and merger or acquisition by another bank.