In a major move the govt has decided to tweak the DICGC Act, introduced in the last budget so that depositors of beleaguered banks get their money quickly and do not have to wait till banks’ liquidations are completed.
Reacting to the news, RBI Central Board member Satish Marathe said “It is a big relief to the Depositors of Banks which are put under moratorium. Earlier depositors of troubled banks had to wait till eternity for getting back their money”. Marathe thanked Finance Minister Ms Nirmala Sitharaman for the historic decision.
Satish Marathe hoped that Depositors of all those UCBs such as Pen Urban, Rupee Co-operative Bank, or Guru Raghavendra Co-operative Banks – which are under RBI Directions for several years – will also get relief from the proposed Amendment.
Put under moratorium since last 7 years Maharashtra based Pen Bank is yet to complete the process of liquidation, after which depositors were entitled to get back their money going by the extant DICGC Act. The newly conceived amendments in the Act will help depositors get their money immediately.
The depositors of Pune based Rupee Co-op Bank are also likely to get benefitted by this amendment in the DICGC Act. Put under moratorium since the last 9 years, the UCB has been trying hard to merge with this bank or that bank, but to no avail so far.
According to a media briefing by the Finance Minister about 98.3 percent depositors of the stressed banks are going to be benefitted by this amendment. “It will also affect 50.9 percent of banks’ deposits”, she revealed.
Talking to Indian Cooperative Satish Marathe who represents co-op banks at RBI Board said the time has come for banks to be extra careful as the new amendment is a wakeup call for them to introduce “Robust Risk Management Architecture, Internal Systems & Controls, Remain adequately Well Capitalised, and Improve culture of Compliance.
Explaining further Marathe said if 98% of depositors are to be given their money within 90 days, banks will have little manoeuvring space. “It is on the strength of accumulated deposits in a troubled bank that further revival or resolution plans are set in motion”, he added.
UCBs need to be extra vigilant by strengthening their monitoring system- be it audit or cyber security as any major crisis in the bank henceforth may lead to its closure, felt Marathe.
Marathe talked about Cosmos Bank in the context and emphasised the need to remain well capitalized. “Cosmos lost close to Rs 100 crore due to cyber-attack in the past but since it has a robust reserve that it could take the hit and move on to make up the losses.
Risk management also assumes more importance now than in the past, said Marathe, adding that except the Saraswat Bank and a few more, most of the UCBs are still lagging in this aspect. RBI has introduced Risk Management more than a decade ago and UCBs should focus on these on an urgent basis, he felt.
The amendment to the DICGC Act is likely to be passed in the monsoon session.