The above is news from Express (also covered in Hindu). The fo | ECONOMY by VIVEK SINGH

The above is news from Express (also covered in Hindu). The following are some relevant points. Pls focus on the bold lines.

1) Deposit Insurance and Credit Guarantee Corporation (DICGC) provides insurance to the depositors money in banks. If a bank goes bankrupt then people are insured of Rs. 5 lakh amount (including principal plus interest) per bank. So, if someone has an account with Axis bank with Rs. 20 lakh deposit.. he will get only Rs. 5 lakhs. And if someone has four accounts in Axis each having Rs. 5 lakhs then only he will get only Rs. 5 lakhs in total. This limit was increased to Rs. 5 lakhs from Rs. 1 lakh last year. But it used to take a lot of time for depositors generally 8 to 10 years to get their money back only after the completion of the liquidation procedure of the bank.

2) Now, what Cabinet has approved yesterday is (and that was also promised in this year budget)... If a bank has not gone bankrupt but is not doing well and RBI has imposed moratorium/restrictions on withdrawal of deposits to improve the condition of the bank (by brining in change of management and other measures)... then in that case also DICGC will have to pay to depositors Rs. 5 lakh (maximum, depending on what is in your account) within 90 days. This was a major issues for depositors as in the last few years several banks had cases related to fraud and were not doing well and RBI imposed moratorium/restrictions on public deposit withdrawal.

3) For the above two cases banks pay premium to DICGC. Basically DICGC Act compels all the banks (except few cooperative banks like which are not regulated by RBI and do not fall under Banking Regulation Act 1949... for details check the book) to purchase insurance for their depositors from DICGC by paying some premium to DICGC. (This is a "regulation of banks" function of RBI)