## Report on The Deposit Insurance and Credit Guarantee Corporation Amendment Act, 2021
**1. Executive Summary:**
This report analyzes the Deposit Insurance and Credit Guarantee Corporation Amendment Act, 2021 (referred to as "the Amendment Act"). The Amendment Act modifies the Deposit Insurance and Credit Guarantee Corporation Act, 1961, introducing provisions for interim payments to depositors of insured banks facing restrictions due to regulatory actions. Key changes include mandating the Corporation to make payments to depositors when restrictions are imposed on accessing their deposits due to directions, prohibitions, orders, or schemes under the Banking Regulation Act, 1949. The amendment also addresses scenarios where such restrictions were already in place before the commencement of the Amendment Act.
**2. Introduction:**
The purpose of this report is to provide an informative overview of the Deposit Insurance and Credit Guarantee Corporation Amendment Act, 2021 (No. 30 of 2021), based on the official government text provided. This report outlines the key changes introduced by the amendment, its likely rationale, implementation aspects, and potential impact.
**3. Policy Overview:**
* **Original Policy:** The Deposit Insurance and Credit Guarantee Corporation Act, 1961.
* **Core Objective(s):** Based on the amendment text, the core objective appears to be to ensure quicker access to insured deposits for depositors of banks facing regulatory restrictions, specifically directions, prohibitions, orders or schemes issued under the Banking Regulation Act, 1949.
**4. Background and Rationale:**
This amendment likely aims to address delays faced by depositors in accessing their funds when banks are placed under restrictions by the Reserve Bank of India (RBI) or other regulatory bodies. The existing framework, as inferred from the changes, might not have provided for timely relief in such situations. The amendment seeks to provide depositors with more immediate access to their insured deposits, mitigating the hardship caused by bank restrictions.
**5. Key Provisions / Changes:**
The Amendment Act introduces the following key changes to the Deposit Insurance and Credit Guarantee Corporation Act, 1961:
* **Amendment to Section 2:** The definition of "insured bank" is amended to include banks subject to directions, prohibitions, orders, or schemes referred to in subsection 1 of section 18A. This expands the scope of the Act to explicitly cover banks under regulatory restrictions.
* **Amendment to Section 15:** This section deals with the premium to be paid by the insured banks. The amendment allows the Corporation, with the approval of the Reserve Bank of India, to raise the limit of fifteen paisa per annum for every hundred rupees of the total amount of deposits in that bank.
* **Insertion of Section 18A:** This is the most significant change. It introduces a new section outlining the "Liability of Corporation to make interim payment to depositors of insured bank."
* **New Rule:** When restrictions are imposed on depositors' access to their deposits under the Banking Regulation Act, 1949, the Corporation becomes liable to pay each depositor an amount equivalent to what is payable under section 16 (deposit insurance amount).
* **Procedure:**
* The insured bank must furnish a list of outstanding deposits within 45 days of the restrictions taking effect.
* The Corporation verifies the claims within 30 days of receiving the list, using an online platform or other prescribed procedures, and confirms the willingness of depositors to receive payments.
* The Corporation then pays the depositors within 15 days of completing the verification, either directly or through the insured bank.
* The entire process from the date the Corporation becomes liable to pay and the actual payment should not exceed 90 days, subject to certain exceptions.
* **Discharge of Liability:** Payments made by the Corporation discharge the insured bank's liability to the depositor to the extent of the payment. The insured bank then becomes liable to the Corporation for the amount paid.
* **Existing Restrictions:** The amendment also addresses situations where restrictions were already in force on the date of commencement of this Amendment Act, mandating that the Corporation become liable to pay depositors from that date, with the timelines computed from that date.
* **Exceptions:** The liability of the Corporation to make payments may be extended by the Reserve Bank of India for up to 90 days if the RBI finds it necessary to finalise a scheme of amalgamation of the insured bank with other banking institution or a scheme of compromise or arrangement or of reconstruction in respect of such insured bank. The Corporation is also not liable to make payments if the restrictions on payments to depositors are removed by the Reserve Bank at any time before payment to depositors by the Corporation under subsection 4, and the insured bank or the transferee bank is in a position to make payments to its depositors on demand without any restrictions.
* **Amendments to Sections 19, 20, and 21:** These sections are amended to include references to the new section 18A, extending the applicability of existing provisions related to recovery and reimbursement to situations involving interim payments made under the new section. Section 21 also allows the Corporation to defer or vary the time limit for receipt of repayments due to it from the insured bank or the transferee bank.
**6. Target Audience and Stakeholders:**
The primary target audience is depositors of insured banks. Other stakeholders include:
* The Deposit Insurance and Credit Guarantee Corporation (DICGC).
* Insured banks, particularly those facing regulatory restrictions.
* The Reserve Bank of India (RBI).
* Transferee banks involved in mergers or acquisitions of restricted banks.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency:** The Deposit Insurance and Credit Guarantee Corporation (DICGC) is primarily responsible for implementing the changes, particularly the interim payment provisions. The Reserve Bank of India (RBI) plays a crucial role in approving any increase in the premium limit and, if needed, extending the time limit of the payment in certain circumstances.
* **Timelines:** The amendment specifies strict timelines for banks to provide deposit lists (45 days), for the Corporation to verify claims (30 days), and for the Corporation to make payments to depositors (15 days after verification, with a total limit of 90 days from the date the Corporation becomes liable).
* **Procedures:** The text mentions the use of an "online platform" for verifying claims, suggesting the development of digital infrastructure to support the implementation. The Corporation will need to establish detailed procedures for verification and payment processes, as well as for handling situations where the Reserve Bank finds it necessary to finalise a scheme of amalgamation of the insured bank with other banking institution or a scheme of compromise or arrangement or of reconstruction in respect of such insured bank.
**8. Expected Outcomes / Impact of Changes:**
The amendment is expected to have the following impacts:
* **Faster Access to Funds for Depositors:** Depositors of restricted banks will gain quicker access to their insured deposits, mitigating financial hardship.
* **Increased Confidence in the Banking System:** The assurance of timely access to insured deposits may boost depositor confidence in the banking system.
* **Operational Challenges for DICGC and Banks:** The DICGC and insured banks will need to adapt their systems and processes to comply with the new timelines and procedures.
* **Reduced Burden on Transferee Banks:** By DICGC directly paying the insured amount, there may be a reduced burden on the transferee bank during amalgamation of banks.
**9. Conclusion:**
The Deposit Insurance and Credit Guarantee Corporation Amendment Act, 2021, represents a significant step towards enhancing depositor protection in India. By mandating interim payments to depositors of restricted banks, the amendment aims to provide timely financial relief and boost confidence in the banking system. The successful implementation of these changes will depend on the DICGC's ability to adapt its processes and infrastructure to meet the new requirements and timelines.
Key Entities Referenced
The Deposit Insurance and Credit Guarantee Corporation Amendment Act, 2021: The name of the act which amends the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
Deposit Insurance and Credit Guarantee Corporation Act, 1961: The principal act being amended by The Deposit Insurance and Credit Guarantee Corporation Amendment Act, 2021.
Parliament: The legislative body that enacted the Deposit Insurance and Credit Guarantee Corporation Amendment Act, 2021.
Central Government: The government body responsible for bringing the Deposit Insurance and Credit Guarantee Corporation Amendment Act, 2021 into force.
Official Gazette: The official publication where the Central Government will announce the commencement date of the act.
Banking Regulation Act, 1949: An act related to the regulation of banking, referenced in the context of directions, prohibitions, orders, or schemes issued to insured banks.
Reserve Bank of India: The central bank of India, which plays a role in approving the increase of deposit insurance limits.
New Delhi: Location of Ministry of Law and Justice and Government of India Press, Minto Road, New Delhi, Delhi
Anoop Kumar Mendiratta: Secretary to the Government of India.
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MINISTRY OF LAW AND JUSTICE
(Legislative Department)
New Delhi, the 13th August, 2021/ Sravana 22, 1943 (Saka)
The following Act of Parliament received the assent of the President on the
13th August, 2021, and is hereby published for general information:—
THE DEPOSIT INSURANCE AND CREDIT GUARANTEE
CORPORATION (AMENDMENT) ACT, 2021
NO. 30 OF 2021
[13th August, 2021.]
An Act further to amend the Deposit Insurance and Credit Guarantee Corporation
Act, 1961.
BE it enacted by Parliament in the Seventy-second Year of the Republic of India as
follows:—
1. (1) This Act may be called the Deposit Insurance and Credit Guarantee Corporation Short title and
(Amendment) Act, 2021. commencement.
(2) It shall come into force on such date as the Central Government may, by notification
in the Official Gazette, appoint.2 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Amendment 2. In section 2 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 47 of 1961.
of section 2. (hereinafter referred to as the principal Act),—
(i) in clause (f),—
(a) in sub-clause (viii), for the words "competent Court", the words
"competent Court; or" shall be substituted;
(b) after sub-clause (viii), the following sub-clause shall be inserted,
namely:—
"(ix) in respect of which any direction, prohibition, order or scheme
referred to in sub-section (1) of section 18A is issued or made;";
(ii) in clause (ff),—
(a) in sub-clause (viii), for the words "in a State.", the words "in a State;
or" shall be substituted;
(b) after sub-clause (viii), the following sub-clause shall be inserted,
namely:—
"(ix) in respect of which any direction, prohibition, order or scheme
referred to in sub-section (1) of section 18A is issued or made;".
Amendment 3. In section 15 of the principal Act, in sub-section (1), in second proviso, for the
of section 15. words "Provided further that", the following words shall be substituted, namely:—
"Provided further that the Corporation may, having regard to its financial position
and to the interests of the banking system of the country as a whole, and with previous
approval of the Reserve Bank of India, from time to time, raise the aforesaid limit of
fifteen paisa per annum for every hundred rupees of the total amount of the deposits
in that bank:
Provided also that".
Insertion of 4. After section 18 of the principal Act, the following section shall be inserted,
new section
namely:—
18A.
Liability of "18A. (1) Where, in respect of an insured bank,—
Corporation
to make (i) any direction is issued or any prohibition or order or scheme is made
interim under any of the provisions of the Banking Regulation Act, 1949; and 10 of 1949.
payment to
depositors of (ii) such direction, prohibition, order or scheme provides for restrictions
insured bank. on depositors of such bank from accessing their deposits,
then, without prejudice to the provisions of sections 16 to 18, the Corporation shall, on
the date on which such direction, prohibition, order or scheme takes effect, become
liable to pay to every such depositor an amount equivalent to the amount payable by
the Corporation to the depositor under section 16.
(2) A list showing the outstanding deposits of each depositor of the insured
bank, as on the date on which the direction, prohibition, order or scheme referred to in
sub-section (1) takes effect, shall be furnished by such insured bank within forty-five
days of such date of effect, in such form and manner as may be specified by the
Corporation and certified to be correct by the chief executive officer of the insured
bank.
(3) The Corporation shall, within thirty days of the date of receipt of the list
under sub-section (2), verify, through an online platform, to the extent possible, or in
accordance with such procedure, as may be prescribed, the genuineness and
authenticity of the claims made therein, and ascertain the willingness of each depositor
to receive the amount due to him out of his deposit in the insured bank.SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 3
(4) Subject to the provisions of sub-section (7), the Corporation shall, before the
expiry of fifteen days from the date of completion of the verification under sub-section (3),
pay to the depositors who have affirmed their willingness thereunder, the amount
payable under sub-section (1) either directly, or get it credited in the account of the
depositors through the insured bank:
Provided that the total period of time between the date when the Corporation
becomes liable to pay to the depositor and the date of payment to the depositor shall
not, subject to the provisions of sub-section (7), exceed ninety days:
Provided further that any amount paid by the insured bank to the depositor
during the period between the date on which the direction, prohibition, order or scheme
referred to in sub-section (1) takes effect and the date of payment to the depositor,
shall be appropriately reckoned by the insured bank before crediting such amount in
depositor's account.
(5) Any amount paid by the Corporation under sub-section (4) in respect of a
deposit shall, to the extent of the amount so paid, discharge the insured bank from its
liability to the depositor in respect of that deposit, but the insured bank shall become
liable to the Corporation in respect of the amount paid by the Corporation.
(6) Where, in respect of an insured bank,—
(i) any direction, prohibition, order or scheme under any of the provisions
10 of 1949. of the Banking Regulation Act, 1949 providing for suspension of business of the
insured bank is already in force as on the date of commencement of the Deposit
Insurance and Credit Guarantee Corporation (Amendment) Act, 2021; and
(ii) such direction, prohibition, order or scheme provides for restrictions
on the amounts to be paid by the insured bank to each of its depositors,
then, notwithstanding anything contained in any other law for the time being in force, the
Corporation shall, on and from the date of commencement of the Deposit Insurance and
Credit Guarantee Corporation (Amendment) Act, 2021, become liable to pay to each depositor
of such insured bank, an amount equivalent to the amount payable by the Corporation to
the depositor under sub-section (1) of section 16, and the time limit specified in sub-
sections (2) to (4) herein for such payment shall be computed from that date.
(7) Notwithstanding anything contained in sub-sections (1) to (6), in cases
where,—
(a) the Reserve Bank finds it expedient in the interest of finalising a scheme
of amalgamation of the insured bank with other banking institution or a scheme
of compromise or arrangement or of reconstruction in respect of such insured
bank, and communicates to the Corporation accordingly, the date on which the
Corporation shall become liable to pay every depositor of such insured bank
may further be extended by a period not exceeding ninety days;
(b) the restrictions on payment to depositors are removed by the Reserve
Bank at any time before payment to depositors by the Corporation under
sub-section (4), and the insured bank or the transferee bank is in a position to make
payments to its depositors on demand without any restrictions, the Corporation
shall not be liable to make payment to the depositors of such insured bank.
5. In section 19 of the principal Act, after the word and figures "section 18", the words, Amendment
figures and letter "or section 18A" shall be inserted. of section 19.
6. In section 20 of the principal Act, after the word and figures "section 18", the words, Amendment
figures and letter "or section 18A" shall be inserted. of section 20.
7. In section 21 of the principal Act,— Amendment
of section 21.
(i) in sub-section (1), after the word and figures "section 18", the words, figures
and letter "or section 18A" shall be inserted;4 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—SEC. 1]
(ii) in sub-section (2), in clause (b), after the words and figures "the scheme
referred to in section 18", the words, figures and letter "or the direction, prohibition,
order or scheme referred to in section 18A" shall be inserted;
(iii) after sub-section (2), the following sub-sections shall be inserted, namely:—
"(3) The Corporation may defer or vary the time limit for receipt of
repayments due to it from the insured bank or the transferee bank, as the case
may be, for such period and upon such terms, as may be decided by the Board in
accordance with the regulations made in this behalf:
Provided that such regulations shall also provide for prudential principles
to assess the capability of the bank to make repayment to the Corporation and
for prohibition of specified other classes of liabilities from being discharged by
the insured bank or the transferee bank till such time as repayment is made to the
Corporation.
(4) In case of any delay in repayment to the Corporation beyond the time
period prescribed under sub-section (2) or extended under sub-section (3), the
Corporation may charge penal interest at a maximum rate of two per cent. above
the repo rate per annum for the amount to be repaid to the Corporation and such
penal interest shall rank equally for priority with the amount to be repaid under
sub-section (2).".
————
ANOOP KUMAR MENDIRATTA,
Secretary to the Govt. of India.
UPLOADED BY THE MANAGER, GOVERNMENT OF INDIA PRESS, MINTO ROAD, NEW DELHI–110002
AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS, DELHI–110054.
MGIPMRND—717GI(S3)—13-08-2021.