Money & Banking

DICGC moves to engage CA firms to complete depositor verification at 55-odd UCBs

K Ram Kumar Mumbai | Updated on September 21, 2021

The DICGC Act has been amended to allow depositors access to up to Rs 5 lakh within 90 days of a bank being placed under moratorium/ AID

Move aimed at ensuring that first list of depositors get paid by the corporation within the stipulated time frame

The Deposit Insurance and Credit Guarantee Corporation (DICGC) has set in motion the process of engaging Chartered Accountant (CA) firms to complete the Herculean task of verification/ certification of claims list and books of records of about 55 insured urban co-operative banks (UCBs), which are currently under the Reserve Bank of India’s All Inclusive Direction (AID).

This is aimed at ensuring that the first list of depositors get paid by the corporation within the stipulated time frame of 90 days from the date (September 1, 2021) when the provisions of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 came into force.

The DICGC Act was amended last month with a provision in Section 18A allowing depositors access to up to ₹5 lakh within 90 days of a bank being placed under moratorium/ AID.

So, depositors of UCBs such as Punjab & Maharashtra Co-operative (PMC) Bank (Mumbai), Sri Guru Raghavendra Sahakara Bank (Bengaluru), Rupee Co-operative Bank (Pune) and Kapol Co-operative Bank (Mumbai) can hope to receive payments up to the insured deposit amount of ₹5 lakh on or before November 29, 2021.

Before the amendment to the DICGC Act, the Corporation would pay depositors the deposit insurance amount, subject to a maximum of Rs 5 lakh, only in the event of the winding up or liquidation of an insured bank. This process would take a few years.

Finance Minister Nirmala Sitharaman, in her Union Budget 2021-22 speech, had said amendments to the DICGC Act will streamline its provisions so that if a bank is temporarily unable to fulfil its obligations, its depositors can get easy and time-bound access to their deposits to the extent of the deposit insurance cover. This would help depositors of banks that are currently under stress.

Claim verification: Racing against time

Claim verification/ certification of depositors, including KYC (know-your-customer) verification, by the CA firm is to ascertain their traceability for payment of claims by DICGC and verifying their willingness to receive insurance claim amount from DICGC.

After the first list is cleared, the Bank, which is under AID, will submit a second and final list, following the above procedure. This list will be verified within a maximum of 15 days of receipt from the bank by CA and certified.

“As the payments to depositors who are willing to receive the insured amount have to be made within statutory time limits, it is emphasised that time is of the essence and verification and the ascertainment process has to be completed within the period specified by the Corporation at the time of giving the claim lists.

“As such, the CA firms while applying, must ensure that they have the adequate manpower to carry out the task in a timely manner,” DICGC said.

Satish Marathe, Founder-Member, Sahakar Bharati, and Director, Central Board of RBI, emphasised that the five-fold increase in the deposit insurance amount to ₹5 lakh (with effect from February 4, 2020), coupled with the amendment to the DICGC Act will provide much-needed relief to depositors of UCBs under Directions.

However, revival of such UCBs may become difficult as their deposit base would have dwindled substantially due to settlement of deposit insurance claim by DICGC and the banks would have to repay to DICGC the amount disbursed by it out of the amount realised from their assets.

Published on September 21, 2021

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