Depositors of a bank under moratorium will now get timely support as the government has approved an amendment that would allow account holders to withdraw up to Rs 5 lakh in 90 days.

The Union Cabinet on Wednesday cleared the amendment to the Deposit Insurance Credit Guarantee Corporation (DICGC) Bill 2021, which insures all bank deposits and covers all commercial banks, including the foreign bank branches in India.

Making this announcement, Finance Minister Nirmala Sitharaman said this will cover 98.3% of all deposit accounts and 50.9% of the deposit value. Globally, the deposit insurance coverage is 80% for all accounts and 20-30% by deposit value.

After the Reserve Bank of India (RBI) puts a troubled bank under moratorium, the lender will take the first 45 days to collect all depositor claims and submit it to DICGC. The processing of the claims will be completed within 90 days even when the bank resolution is ongoing.

“Normally, it takes 8-10 years after complete liquidation to get money under insurance. But now, even if there is a moratorium, within 90 days, the process will definitely be completed, giving relief to depositors,” Sitharaman said.

Last year, the government raised insurance cover on bank deposits by five-folds to Rs 5 lakh to provide support to the depositors of ailing lenders like Punjab and Maharashtra Co-operative (PMC) Bank.

The amendment to the DICGC Bill, 1961 is the budget announcement made by the finance minister.

As per the current provisions, the deposit insurance of up to Rs 5 lakh comes into force when the licence of a bank is cancelled and the liquidation process starts.

DICGC, a wholly-owned subsidiary of the RBI, provides insurance cover on bank deposits.