Tag: Deposit Insurance and Credit Guarantee Corporation

Depositors of 16 stressed cooperative banks to get up to Rs 5 lakh, BFSI News, ET BFSI

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New Delhi, Nov 28 (PTI) Customers of 16 stressed cooperative banks will get up to Rs 5 lakh deposit insurance cover on Monday by Reserve Bank of India’s subsidiary DICGC as part of its mandate under a new law. The Deposit Insurance and Credit Guarantee Corporation (DICGC) had earlier prepared a list of 21 banks but five, including Punjab & Maharashtra Co-Operative Bank (PMC Bank), are out of the list as they are either in merger process or out of the moratorium.

Parliament in August passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing a moratorium on the banks.

Following enactment, the government has notified September 1, 2021 as the date on which the provisions of the Act would come into force. The mandated 90 days from the notified date comes to an end on November 29, 2021.

The depositors of these banks, who have not yet submitted their claims, are advised to contact the respective banks, a public notice from DICGC said.

“The claims should be supported by officially valid documents of identity and written consent to receive the amount lying in credit of their deposit account (willingness declaration) subject to a maximum of Rs 5 lakh along with alternate bank account details into which the said amount may be credited,” it said.

Depositors submitting valid documents, as mentioned above, will be paid by credit to the alternate bank account specified by depositors or on their consent, to their Aadhaar linked bank account, it said.

For the second phase, the last date for submission of documents is December 10, 2021 while date of payment is December 31, 2021, it added.

Besides PMC Bank, depositors of Hindu Co-Op Bank Ltd, Pathankot of Punjab, Rupee Co-Operative Bank Ltd and Needs Of Life Co-Operative Bank Ltd from Maharashtra and Bidar Mahila Urban Co-Op Bank Ltd of Karnataka are out of this.

It is to be noted that the RBI had in June given in-principle approval to a consortium of Centrum Financial Services and fintech startup BharatPe to acquire the stressed PMC Bank.

Clearing decks for the takeover, the RBI in October gave licence for small finance bank to the consortium. Recently, the DICGC said there may be a need to invoke the provisions of Section 18 A (7) (a) of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021.

As per the Section 18 A (7) (a) of the Act, if a stressed bank is under the resolution process, the period for disbursement of Rs 5 lakh can be further extended by 90 days.

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.

It is to be noted that 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 as it has been static since 1993. PTI DP MKJ



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RBI, BFSI News, ET BFSI

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Customers of stressed Punjab & Maharashtra Co-Operative Bank (PMC Bank) will not get up to Rs 5 lakh insurance cover in the first lot as the multi-state co-operative bank is under the resolution process. Deposit Insurance and Credit Guarantee Corporation (DICGC) in the first lot will pay customers of 20 stressed banks except PMC Bank. For the first lot, the mandatory 90 days period concludes on November 30.

It is to be noted that RBI had in June given in-principle approval to a consortium of Centrum Financial Services and fintech startup BharatPe to acquire the stressed PMC Bank.

Clearing decks for the takeover, the RBI earlier this month gave licence for small finance bank to the consortium.

Recently, the DICGC said there may be a need to invoke the provisions of Section 18 A (7) (a) of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021,

As per the Section 18 A (7) (a) of the Act, if a stressed bank is under the resolution process, the period for disbursement of Rs 5 lakh can be further extended by 90 days.

“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,” it said.

In September 2019, the RBI had superseded the board of PMC Bank and placed it under various regulatory restrictions after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL.

The Reserve Bank of India (RBI) had imposed restrictions on the withdrawal of deposits from these stressed banks. Of the 20 banks, 10 are from Maharashtra, five from Karnataka, and one each from Uttar Pradesh, Kerala, Rajasthan, Madhya Pradesh, and Punjab.

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.

It is to be noted that 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 as it has been static since 1993.



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Top banks face up to Rs 800 crore hit on GST on FD insurance premiums, BFSI News, ET BFSI

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Major banks face increased costs of Rs 250 to Rs 800 crore on input tax credit on insurance paid to Deposit Insurance and Credit Guarantee Corporation (DICGC) by them on fixed deposits after the hike in insurance of deposits to Rs 5 lakh from Rs 1 lakh

The indirect tax department is questioning banks on the status of input tax credit (ITC) on the insurance paid to the DICGC.

All banks are required to insure this amount with the DICGC and pay a premium on that sum, for which an 18% GST rate is applicable.

Most banks consider GST as a cost and add it towards the available input tax credit.

Input tax credit

Input tax credit is GST paid on input services or raw materials that can be set off against a certain kind of future tax liability.

The indirect tax department is contesting the availability of input tax credit on insurance premiums.

Banks may have to shell out not only higher premiums and also incur higher tax costs due to credit disputes.

The indirect tax department claims the insurance premium paid by banks is not towards taxable output services and so they cannot input tax credit. As per the GST framework, banks can only avail half of the input tax credit available to them. The tax department claims the insurance premium is not towards the “core” function of banks.

Services free

Since most services provided by banks to fixed deposit holders are free, the tax credit cannot be used against any outgoing GST as well, it says.

SBI, Bank of Baroda, Punjab National Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and IndusInd Bank are the major banks that may be affected.

Under the existing tax laws, there is an ongoing debate as to whether any cost that a company or a financial institution incurs due to a regulatory requirement should be considered crucial, and whether input tax credit hould be available on that.



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Rupee Bank notifies refund scheme, relief for depositors of up to Rs 5 lakh, BFSI News, ET BFSI

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Pune: The stressed Rupee Cooperative Bank has notified the scheme of the Deposit Insurance and Credit Guarantee Corporation (DICGC) to refund account holders up to Rs5 lakh.

The DICGC announcement is valid for 21 insured banks operating under all-inclusive directions (AID), including Rupee Bank. Rupee Bank administrators said they will forward all claims made under the scheme to DICGC by October 15, 2021, after which approved claims will be settled by the DICGC within 90 days.

Rupee Bank administrator Sudhir Pandit said it is “premature” to say what will happen in case of depositors holding amounts exceeding Rs5 lakh. “The DICGC told us to maintain expenses to run the bank for the next six months, within which hopefully there will be a resolution plan for the bank; be it merger with a larger bank, or its revival. We even met Union finance minister Nirmala Sitharaman,” said Pandit.

“A resolution plan or revival will ensure that larger depositors do not lose most of their money, because if the bank is liquidated, large depositors may collectively lose Rs 375 crore,” added Pandit.



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Rupee Coop Bank depositors oppose DICGIC decision to pay Rs 5 lakh to account holders of stressed coop banks

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Rupee Cooperative Bank, headquartered in Pune, has been under strict banking restrictions because of mounting debt.

A group of people claiming to represent the interests of account holders and depositors of Rupee Cooperative Bank has opposed the decision taken by the Deposit Insurance and Credit Guarantee Corporation (DICGC) to pay depositors of 21 stressed cooperative banks a sum of Rs 5 lakh within 90 days.

The DICGC has said that, following the amendment of the DICGC Act, it will make payments to depositors within 90 days. Besides PMC, the large banks include Rupee Cooperative Bank, Kapol Cooperative Bank, Maratha Coop Bank, and City Coop Ban, all from Maharashtra. Depositors in these banks have been waiting for years for their money. RBI had placed the banks under its all-inclusive directions, which included restrictions on withdrawal of deposits.

Dhananjay Khanzode, one of the depositors of the Rupee Cooperative Bank, said that depositors should be given their entire amounts and not just Rs 5 lakh since they have been waiting for years for their money. He asked depositors to wait for a month since the decision of the Bombay High Court is still awaited. The Rupee Cooperative Bank depositors had filed a civil writ petition with the Bombay High Court, seeking release of their deposits and action against the current administrators of the bank.

Khandzode said that he would approach depositors of the other stressed banks as well to jointly tackle this issue.

DICGIC has said that banks will have to submit a claim list by October 15 and update the position as of November 29 with principal and interest in a final updated list.

Rupee Cooperative Bank, headquartered in Pune, has been under strict banking restrictions because of mounting debt.

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Depositors of stressed 23 cooperative banks including PMC to get up to Rs 5 lakh back, BFSI News, ET BFSI

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Depositors of stressed banks like Punjab & Maharashtra Cooperative (PMC) Bank are now set to get up to Rs 5 lakh back from November 30 as the government has notified the amendment to the DICGC Act.

Parliament earlier this month passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing moratorium on the banks.
The amount of Rs 5 lakh would be provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The government has notified September 1, 2021 as the date on which the provisions of the Act shall come into force, according to a gazette notification dated August 27, 2021.

“In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September, 2021, as the date on which the provisions of the said Act shall come into force,” it said.

Effective date

Consequently, 90 days from the effective date is November 30, 2021 for depositors to get their funds back.

The first 45 days are meant for the bank, which has come under stress, to collect all the details of the accounts where the claims will have to be made. This will then be forwarded to the insurance company, which in real-time will check it all up, and nearer the 90th day, depositors will get the money, Finance Minister Nirmala Sitharaman had said.
The benefit will also accrue to the depositors of 23 cooperative banks which are in financial stress and on which the Reserve Bank of India (RBI) has imposed certain restrictions.

DICGC, a wholly-owned subsidiary of the RBI, provides insurance cover on bank deposits. At present, it takes 8-10 years for the depositors of a stressed bank to get their insured money and other claims.

Cooperative bank failures

Though the RBI and the Centre keep monitoring the health of all banks, there have been numerous recent cases of lenders, especially cooperative banks, being unable to fulfil their obligations towards the depositors due to the imposition of a moratorium by the RBI.

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.



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Depositors of stressed banks to get up to Rs five lakh back from November 30, BFSI News, ET BFSI

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Depositors of stressed banks like Punjab & Maharashtra Cooperative (PMC) Bank are now set to get up to Rs 5 lakh back from November 30 as the government has notified the amendment to the DICGC Act. Parliament earlier this month passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing moratorium on the banks.

The amount of Rs 5 lakh would be provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

The government has notified September 1, 2021 as the date on which the provisions of the Act shall come into force, according to a gazette notification dated August 27, 2021.

“In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September, 2021, as the date on which the provisions of the said Act shall come into force,” it said.

Consequently, 90 days from the effective date is November 30, 2021 for depositors to get their funds back.

The first 45 days are meant for the bank, which has come under stress, to collect all the details of the accounts where the claims will have to be made. This will then be forwarded to the insurance company, which in real-time will check it all up, and nearer the 90th day, depositors will get the money, Finance Minister Nirmala Sitharaman had said.

The benefit will also accrue to the depositors of 23 cooperative banks which are in financial stress and on which the Reserve Bank of India (RBI) has imposed certain restrictions.

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

At present, it takes 8-10 years for the depositors of a stressed bank to get their insured money and other claims.

Though the RBI and the Centre keep monitoring the health of all banks, there have been numerous recent cases of lenders, especially cooperative banks, being unable to fulfil their obligations towards the depositors due to the imposition of a moratorium by the RBI.

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.



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RBI, BFSI News, ET BFSI

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Mumbai: The economy is gaining traction with gradual pick up in manufacturing activity and moderation in contraction of services, spurred by comfortable liquidity conditions, an RBI article on Tuesday said.

Observing that the retreat of the second wave of coronavirus pandemic has been slow, the RBI in an article on the ‘State of Economy’ said, the aggregate demand conditions are buoyed by the release of pent-up demand post unlock, while the supply situation is improving with the monsoon catching up to its normal levels and sowing activity gaining pace.

“Reaffirming the traction that the economy is gaining, the manufacturing activity is gradually turning around, while contraction in services has moderated. Spurred by comfortable liquidity conditions, financial conditions stay benign and supportive of the recovery,” it said.

The article notes that with the cautious unwinding of restrictions by states, human mobility has risen to levels last seen in February 2021, prior to the onset of the second wave. Electricity generation readings, too, have recovered to peak levels seen in April 2021 and are closing on to the pre-pandemic level (July 2019).

It has been authored by team lead by RBI deputy governor Michael Debabrata Patra. The central bank said views expressed in the article are those of the authors and do not necessarily represent the views of the RBI. E-way bill collections rose to their highest level in the last four months, clocking a growth of 17.3% sequentially over June 2021. Normalised to February 2020 levels, E-way bills, both intra-state and interstate, surpassed pre-pandemic levels. In August so far (up to August 8, 2021), daily average E-way bills declined sequentially by 5.8%, with implications for GST collections going forward.

Also toll collections rebounded in July, nearing the March 2021 record when Fastag was made mandatory. As per the article, fuel consumption recorded an uptick in July 2021. While the consumption of petrol reached pre-pandemic levels and aviation turbine fuel (ATF) recorded a sequential improvement, diesel consumption slipped marginally.

On the price rise front, the article said the headline CPI inflation for July 2021 came in at 5.6%, down 70 bps from 6.3% a month ago and “reinforcing the view that the recent upsurge has peaked and the worst would be behind us”. Further, high frequency food price data from the department of consumer affairs indicate an uptick in cereal prices in August so far. Prices of pulses, on the other hand, continue to soften. Edible oil prices are seeing some pressures. Among key vegetables, prices of potatoes, onions and tomatoes saw some seasonal increase in prices, it said. On the the recent enactment of amendments to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, the article said it is a major step towards ameliorating depositor distress. agencies



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RBI cancels licence of Madgaum Urban Co-operative Bank Ltd, Margao, BFSI News, ET BFSI

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The RBI on Thursday cancelled the licence of The Madgaum Urban Co-operative Bank Limited, Margao, Goa, as the bank with its current financial position would be unable to pay its present depositors in full.

The RBI further said that as per the data submitted by the bank, about 99 per cent of the depositors will receive full amounts of their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh only from the DICGC.

The Office of Registrar of Cooperative Societies, Goa, has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank, the RBI added.

The Madgaum Urban Cooperative Bank, the RBI said, does not have adequate capital and earning prospects and has failed to comply with various provisions of the Banking Regulation Act, 1949.

Further, “the bank with its present financial position would be unable to pay its present depositors in full; and public interest would be adversely affected if the bank is allowed to carry on its banking business any further”, it said while cancelling the licence.

“Consequent to the cancellation of its licence, The Madgaum Urban Co-operative Bank Limited, Margao, Goa is prohibited from conducting the business of ‘banking’ which includes acceptance of deposits and repayment of deposits…with immediate effect,” the RBI said.

With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors will be set in motion.

Globally, inoculation drives and unlocking of economic activities are gradually raising hiring intent in many regions, but the recovery is inconsistent, the report said.

The Americas, Europe and APAC witnessed impressive improvement in hiring intent. Talent markets in the US, Canada and Middle East benefit from high vaccination rates, while those in APAC countries benefit from the unlocking of their economies, it added.



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RBI cancels licence of Pune-based Shivajirao Bhosale Sahakari Bank, BFSI News, ET BFSI

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The RBI on Monday said it has cancelled the licence of Shivajirao Bhosale Sahakari Bank, Pune as the lender does not have adequate capital and earning prospects. As per data submitted by Shivajirao Bhosale Sahakari Bank, more than 98 per cent of the depositors will receive full amount of their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC), the RBI said in a release.

On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh from the DICGC.

Giving details, the RBI said the bank does not have adequate capital and earning prospects and as such, it does not comply with the certain provisions of the Banking Regulation Act, 1949.

“The continuance of the bank is prejudicial to the interests of its depositors,” it said, adding that the bank with its financial position would be unable to pay its present depositors in full.

While cancelling the licence, effective close of business hours on Monday, the RBI said public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

The Registrar of Cooperative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator.

The release further said consequent to the cancellation of its licence, Shivajirao Bhosale Sahakari Bank is prohibited from conducting the business of banking, including acceptance of deposits and repayment of deposits, with immediate effect.



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