Banking Infrastructures have been the pillars of the financial functioning of the economy. Throughout decades now they have been labelled as the institutions responsible for leveraging credit, initiating liquidity in financial transactions, and bringing about mobility in financial operations and functioning. After the Coronavirus Pandemic struck, banking institutions and their deposit claim and earning ratio have come to a halt. With the banking sector slowly inching towards privatization people are no more inclined to keep their financial deposits in the commercial banks. Public Sector Banking Institutions have also borne the brunt of the financial instability caused by the pandemic situation. Thereby the economic uncertainty has been detrimental to the growth of the financial environment in the country.
Insurance regulator and the Deposit of Insurance Credit Guarantee Corporation (DICGC) have decided to allow consumers with a time frame of 90 days for withdrawing their deposits from the banking institutions if the institution in question is liquidated and is forced to stop operations. Recently the consumers were aggrieved after Punjab and the Maharashtra Cooperative Banking Institutions were unable to liquidate the insured deposits of the consumers. A private banking body, Yes Bank too faced a similar situation in the recent past. Therefore after the announcement of the budget estimates, Finance Minister Nirmala Sitharaman has appealed to the RBI and the DICGC to increase the deposit amount of insurance from Rs 1,00,000 to 5,00,000. The amount was increased from 30,000 to 1,00,000 in 1993. Therefore up to deposits of 5,00,000, the consumers would get the facility to withdraw the entire amount of insurance deposit, within a time frame of 90 days if the banks decide to stop their operations without any prior information. This clause has also been incorporated into the Banking Regulation Act.
Thus, this move is sure to bring about much-required financial independence and regulation in the economy.