Depositors of Punjab & Maharashtra Co-operative (PMC) Bank and 20 other stressed co-operative banks will heave a sigh of relief as the DICGC has announced it will pay them up to Rs 5 lakh in 90 days.

The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India (RBI), has asked the depositors of these 21 insured co-operative banks to prepare a list of account holders eligible to receive Rs 5 lakh within 90 days, as part of its mandate under a new law.

"These (21) banks shall submit a claim list by October 15, 2021 and update the position as on November 29, 2021 (with principal and interest), in a final updated (second) list, to enable DICGC settle the claim and discharge its insurance liability in full as per norms," DICGC said in a statement. 

DICGC has also asked the banks to circulate consent form to account holders for accessing funds up to Rs 5 lakh as per the amended law within 90 days. 

"Unpaid (updated willingness list)/difference in amount of deposits up to the eligible amount (as per the final updated list submitted by November 29, 2021) will be paid within 30 days of receipt (i.e., by December 29, 2021)," it said. 

Besides PMC Bank, the banks include City Co-operative Bank, Sri Guru Raghavendra Sahakara Bank, Rupee Cooperative Bank, Independence Cooperative Bank, Adoor Co-Operative Urban Bank, Bidar Mahila Urban Co-Op. Bank Ltd and Peoples Cooperative Bank. 

While 11 banks are from Maharashtra, five are from Karnataka and one each from Uttar Pradesh, Madhya Pradesh, Punjab, Kerala, and Rajasthan. These banks had been under RBI direction with restrictions on the withdrawal of deposits. 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. 

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. 

Mumbai-based PMC Bank came under regulatory restrictions in September 2019 and the RBI superseded the board after financial irregularities came to light. In June, the RBI gave an in-principle nod to Centrum Financial Services Ltd (CFSL) to set up a small finance bank. This will take over the troubled PMC Bank.