Lok Sabha Question No. 3650 (UNSTARRED), answered on 2022-08-08
Subject: Protection of Investors
Ministry: FINANCE
Asked by: Keshari Devi Patel

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 3650

ANSWERED ON MONDAY, 8 th  AUGUST, 2022/ SRAVANA 17, 1943 (SAKA)

## PROTECTION OF INVESTORS

## Ϯ3650. SHRIMATI KESHARI DEVI PATEL

Will the Minister of FINANCE be pleased to state:

- a)  the details of the steps being taken to protect the interests of the investors/account holders having Fixed Deposit (FD) in the bank;
- b)  whether  the  Government  proposes  to  take  any  step  to  safeguard  the  money  of investors  in  view  of  the  fact  that  an  investor  having  a  FD  of  Rs.10  lakhs  is  only ensured  upto  five  lakhs  and  in  case  of  default  by  the  bank  the  investors/account holders will get only the ensured amount and the balance amount is lost and if so, the details thereof and if not, the reasons therefor; and
- c)  whether  the  Government  proposes  to  take  any  step  to  provide  the  benefit  of  the interest accrued on FD in the bank to the investors for the duration for which the fixed deposits  has  been  kept  in  the  bank  even  if  one  opts  to  use  FD  before  the  lock-in period keeping in view that as per the present norms FD has a lock-in period of five years, so one can withdraw the fund only after maturity otherwise no benefit is given to the investors and if so, the details thereof?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (DR. BHAGWAT KARAD)

- (a)  to  (c):  The  Deposit  Insurance  and  Credit  Guarantee  Corporation  (DICGC),  a  whollyowned subsidiary of the Reserve Bank of India (RBI), provides insurance for bank deposits:
-  DICGC  insures  all  deposits  such  as  savings,  fixed,  current  and  recurring,  etc.  including accrued interest, in terms of the provisions of the DICGC Act, 1961. As specifically defined in Section  2  (g)  of  the  Act,  'deposit'  means  the  aggregate  of  the  unpaid  balances  due  to  a depositor in respect of all his accounts by whatever name called, thereby including, inter alia, fixed deposits and accrued interest in its ambit. Section 16 (1) of the Act further provides for deposit insurance for a depositor by DICGC equal to the amount due to him in respect of his deposit in the bank, subject to the ceiling/ limit of deposit insurance.
- ·With  a  view  to  providing  a  greater  measure  of  protection  to  depositors  in  banks,  DICGC raised the limit of insurance cover for depositors in insured banks from the earlier level of ₹1 lakh to ₹5 lakh per depositor with effect from 04.02.2020.
- Accordingly, the number of fully protected accounts at end-March 2022 constituted 97.9% of  the  total  number of  accounts.  In  terms of  amount,  the  total  insured deposits as at endMarch  2022  stood  at  ₹81,10,431  crore  and  constituted  49.0%  of  assessable  deposits (₹1,65,49,630 crore). This is higher than the guidance of International Association for Deposit Insurance (IADI) which recommends coverage of number of accounts up to 80% and 20-30%

in value terms. As per core principle of effective deposit insurance, cover should be limited, credible,  cover  vast  majority  of  deposits,  and  subject  to  market  discipline.  Cover  given  by DICGC is according to this principle.

· The deposit insurance cover of ₹5 lakh is applicable uniformly to all insured banks and their depositors, and  is  payable  to  any  depositor  in  respect  of  deposits  held  by  him/  her  in  the same right and same capacity at all the branches of an insured bank taken together, in case of liquidation/ failure of a bank.

·  Further, vide the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021  which  was  brought  into  force  with  effect  from  01.09.2021,  a  new  Section  18A  was inserted in the DICGC Act, 1961, enabling depositors to get easy and time-bound access to their deposits to the extent of deposit insurance cover through interim payments by DICGC, in cases of imposition of restrictions on banks under the Banking Regulation Act, 1949 such as  when  banks  are  placed  under  'All  Inclusive  Directions'  (AID)  by  RBI.  In  such  cases, DICGC is liable to make interim payments to depositors up to the deposit insurance cover of ₹  5  lakh  within  90  days  of  imposition  of  such  directions.  The  time-bound  payment  to depositors of banks placed under AID has paved the way for improving public confidence in the banking system and has also helped in strengthening financial stability.

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