Scrap Deposit Insurance for PSBs, Commercial Banks: AIBEA
Even as the finance minister has announced plans to increase deposit insurance and bring in a Bill to re-introduce the ‘bail-in’ clause, the All India Bank Employees' Association (AIBEA) has demanded scrapping of such insurance cover for public sector bank (PSB) deposits.
 
CH Venkatachalam, general secretary of AIBEA, in a letter to finance minister Nirmala Sitharaman, says, "Year after year, public sector banks (PSBs) and all commercial banks are required to pay huge premium to Deposit Insurance and Credit Guarantee Corp (DICGC) but the claim ratio is nil because there is no possibility of these bank being liquidated and making any claims for the insured amount. Also in view of section of 45 of Banking Regulations Act, PSBs and commercial banks should be exempted from the purview of deposit insurance scheme."
 
According to AIBEA, after an amendment in 1960 in the Banking Regulations Act, not a single commercial bank has been liquidated or closed. PSBs also enjoy the sovereign guarantee of the government and there is no question or possibility or eventuality of any commercial bank getting closed down or liquidated, Mr Venkatachalam added.  
 
As on 31 March 2019, the deposit insurance fund at DICGC (Deposit Insurance and Credit Guarantee Corporation) is Rs97,350 crore, including a surplus of Rs87,890 crore. The claims settled by DICGC so far since 1962 is only Rs5,120 crore and that too for the cooperative banks.
 
 
"Out of 2,098 banks covered by the DICGC, 1,941 banks are cooperative banks. Only these banks are facing problems of closure and liquidation and the deposits of these banks need to be covered by DICGC. Even in the case of these banks, only to extent of deposits covered by the insurance cover, premium should be charged and not on the total assessable deposits which is much higher," Mr Venkatachalam says.
 
As per data provided by AIBEA, in FY18-19, commercial banks, including PSBs, paid a deposit insurance of Rs11,190 crore while cooperative banks paid Rs850 crore, taking the total premium paid to DICGC at Rs12,040 crore. During the same year, DICGC received claims worth Rs37 crore from cooperative banks. However, none of the claims was settled. 
 
The bank employee union also highlights the gap between premium paid and insurance coverage. It says, "While the entire amount of deposit is taken as assessable deposit and premium is collected on the total deposits, the scheme covers insurance only up to Rs1 lakh. Thus Banks are paying premium even for the deposits which are not insured. For example, premium paid for FY2018-19 was on deposits worth Rs120 lakh crore but deposits covered by insurance were only for Rs33.70 lakh crore or just 28% of the total deposits."
 
AIBEA says, there are about 271 crore bank accounts, which are covered by insurance, out of which only 200 crore or 92% accounts are fully protected by DICGC. These 2 billion fully protected accounts are worth Rs120 lakh crore, but only 28% deposits that are worth Rs33.70 crore are covered under the deposit insurance scheme.
 
Across the country, all cooperative banks have deposits worth Rs8.49 lakh crore, out of which only deposits worth Rs3.77 lakh crore or 44% of the total deposits are covered under the DICGC scheme. At the same time, 19 PSBs have total deposits worth Rs72 lakh crore, out of which just 30% of Rs22 lakh crore, are covered under the deposit insurance scheme, AIBEA added.
 
After the collapse of Palai Central Bank Ltd and Laxmi Bank Ltd, in 1960, the government introduced the Deposit Insurance Corporation Bill, 1961. The Bill was approved by the Parliament in December 1961. Accordingly, the Deposit Insurance Corporation Act came into being with effect from 1 January 1962.
 
Earlier, only commercial banks were covered by the Act. Later, cooperative banks, regional rural banks, primary agricultural societies were also brought under the coverage of deposit insurance.
 
To begin with, the insurance cover against bank deposits were up to Rs1,500. In 1968, it was enhanced to Rs5,000, in 1970 to Rs10,000, in 1976 to Rs20,000, in 1980 to Rs30,000 and in 1993, the cover was enhanced to Rs1 lakh, which continues till today.
 
Similarly, in the beginning, premium payable for the deposit insurance was at 0.05 paise per Rs100 per year. In 1971, it was revised to 0.04 paise. Later in 1963, it was increased to 0.05 paise, 0.08 paise in 2004 and to 0.10 paise in 2005.
 
 
"We submit to the government that the deposits of public sector banks and commercial banks which are covered by Section 45 of the Banking Regulations Act be exempted from the coverage of DICGC cover. In addition for cooperative banks, the premium should be charged only on the deposit amount insured and not on the total assessable deposits of the Bank," Mr Venkatachalam from AIBEA added.
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    COMMENTS

    ksrao

    3 weeks ago

    PSBs are owned by the government. If they fail, government should come to their rescue. Seeking another agency's help for deposit insurance shows that the govt has not realized its responsibility. Deposit insurance for PSBs is a gimmick and should be given up. -Dr KS Rao, former Chief General Manager, SBI.

    M D Khattar

    3 weeks ago

    The main (in fact the only ) culprit is the coperative banks. Moreover the constitute a very large part of the total number of banks . Also failures of banks is confined to such banks only . The compensation paid by the deposit agency is only to such banks
    So , question is why have these type of banks . we should critically examine their working and see that they work professionally ( why politicians) . In fact these are the banks which need insurance and therefore pay the premium

    Rahul T DeSai

    3 weeks ago

    The entire amount deposited must be covered preferably for Senior Citizen (the principal amount.) as there are no Govt. SECURITY scheme for them.

    Parimal Shah

    3 weeks ago

    Makes sense.

    RABINDRA SATPATHY

    3 weeks ago

    200% justified demad. Insurence for Commercial bank deposit is not at all required.

    chandrashekar

    3 weeks ago

    The insurance premia by Commercial Banks is the life line of DICGC.

    PMC Bank Fraud: Forensic Audit Reveals Rampant Violation of Rules; RBI Committee, ED, EOW To Sell HDIL Assets
    The preliminary forensic audit report of Punjab and Maharashtra Cooperative Bank (PMC Bank) submitted by Grant Thornton, a leading auditor firm commissioned by the Reserve Bank of India (RBI), exposes rampant violation of loan sanctioning norms by the Bank. The economic offences wing (EOW) of Mumbai police had submitted the report to the court. The report also suggests that Housing Development Infrastructure Ltd (HDIL), and its promoters the Wadhawan family, obtained loans from the Bank without adequate security, say reports.
     
    The size of the scam has gone up as a result. The preliminary report shows that PMC Bank never showed HDIL as a bad loan or non-performing asset (NPA) and the Bank created fictitious accounts to grant loans to the Wadhawan company. 
     
     
    Separately, a report by Moneycontrol.com  says, the RBI, Enforcement Directorate (ED), EOW and administrator of PMC Bank have formed a coordination team to expedite action in this case.
     
    "On Monday, RBI governor Shaktikanta Das, ED director Sanjay Kumar Mishra, Mumbai Police Commissioner Sanjay Barve and PMC Bank administrator JB Bhoria met at the RBI headquarters to discuss next steps in the case. After seeking court approval, the RBI will direct the PMC Bank administrator to begin the process of sale of assets under the SARFAESI Act," the report says.
     
    Last week, the EOW arrested Rajneet Singh, son of Sardar Tara Sing, former member of legislative assembly (MLA) from Mulund in the PMC Bank fraud case. Rajneet Singh was director of PMC Bank before the RBI put restrictions on the lender. He was also on the recovery committee of the Bank.   
     
    The EOW had also arrested Jayesh Sanghani and Ketan Lakdawala, the two auditors who did the statutory audit of fraud-hit PMC Bank. 
     
     Last month, the ED had seized and identified movable and immovable assets worth more than Rs3,830 crore owned by HDIL, the company directors and promoters, as well as official of PMC Bank and others related entities in the fraud case.
     
    The PMC Bank has been put under restrictions by the RBI since September after an alleged Rs4,355 crore scam came to light, following which the deposit withdrawal was initially capped at Rs1,000, causing panic and distress among depositors. The withdrawal limit has been raised in a staggered manner to Rs50,000.
     
    Founded in 1984 by S Gurcharan Singh Kochhar from a small room in Mumbai, the Bank had now grown to a network of 137 branches in six states and ranked among the top 10 cooperative banks in the country.
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    COMMENTS

    DeepakSB

    3 weeks ago

    Hindustan Times-Mumbai-20-Nov-2019-Page No.1-Headlines-at PMC,RBI confirms that Tempering of Core Banking system was done by some "BANK EMPLOYEES "

    Amarjit Singh

    3 weeks ago

    But Bank employees is good in services

    manojkamrarti

    3 weeks ago

    Special status to urban cooperative banks is like Section-370 of Jammu and Kashmir. No vital BR Act provisions apply to UCBs giving full freedom to commit scams.

    So GoI should immediately remove special status to UCBs to stop further scams by repealing corrupt sections, subsections inserted in 1984, 2013 by amending the Act.

    Nakul Kumar Reddy

    3 weeks ago

    First they have to sell their all assets,they will know the pain of public assets.

    Dr Benoy Kumar Chattapadhyaya

    3 weeks ago

    What about RBI? This Institutions also Frauder. They have Frauded me Rs.1,34,700 by RBI Official Mr. Sameer Singh Head Customer Consumer Forum RBI New Delhi for transferred of my Fund which is under Custody of RBI. Still it is pending they have not send my Fund nor Refund my money what ever I have send to RBI. Matter has been reported Governor RBI no action has been taken nor given any reply to me. It has been came through [email protected]

    REPLY

    Sucheta Dalal

    In Reply to Dr Benoy Kumar Chattapadhyaya 3 weeks ago

    Afraid you have been scammed by a digital fraud. RBI is a regulator and monetary authority and does not do any of the things you are accusing it of. Moreover the email you have mentioned is a fraudulent email. You need to file a police complaint. There is nothing like a "customer forum" of RBI in delhi. In fact, the RBI issues frequent warnings about the misuse of its name.

    DeepakSB

    3 weeks ago

    https://www.saraswatbank.com/content.aspx?id=Long-Term

    REPLY

    DeepakSB

    In Reply to DeepakSB 3 weeks ago

    Ms. Dalal.... Awaiting your comments and expert guidance on long term deposits issue. Thanks.

    DeepakSB

    3 weeks ago

    RBI has officially given licence to co-operative banks to loot and cheat its account holders.

    As of Nov 2019-PMC Bank scam and other co-operative bank scams are daily reported in press and media.

    (Pdf file attached-terms and conditions of Long Term Deposits -LTD-by Saraswat Bank-with permission of RBI).

    RBI link for long term deposits.

    https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10487

    Its surprising that these LTDs are NOT covered by Bank Deposits Insurance scheme (DICGC).

    No loan/Overdraft/Premature withdrawal available till 7 years.

    If CO-Operative bank closes down/liquidated during tenure of 7 years of LTDs (long term deposits )-depositor will LOOSE ALL AMOUNT.
    🚒🚒 Can any Individual/Organization/Consumer Forum study these and file PIL to stop further cheating by co-operative banks of its account holders? 🚒🚒

    Nakul Kumar Reddy

    3 weeks ago

    Pmc bank total assets put in to auction.

    Turkish cybercriminals hack Tripura ATMs, steal huge cash
    After Assam, suspected cybercriminals from Turkey have stolen huge amounts of cash from ATMs through ATM-cloning devices installed in Tripura's capital Agartala, police said on Monday.
     
    According to the police, banks and other sources, over 60 bank customers of different banks mostly State Bank of India (SBI) during the past few days lost lakhs of rupees due to the fraudulent acts of the cybercriminals and ATM hackers.
     
    Tripura police's Cyber Crime wing Superintendent of Police Sharmistha Chakraborty said that as per their preliminary probe the Turkish nationals who had taken out lakhs of rupees of bank customers through the ATM-cloning devices in Guwahati in August are also involved in similar hacking in Agartala.
     
    "We are collecting complaints of bank customers from various police stations and different bank branches to gather the information and other details of stolen cash of many bank customers from ATMs through ATM-cloning devices," Chakraborty told IANS.
     
    She said according to their information available the suspected Turkish nationals after pilfering money from the several ATMs left Tripura for Kolkata.
     
    "Our probe is on. If necessary we would take help from other agencies of concerned states where similar crimes took place," the official added.
     
    According to local media reports, over Rs 80 lakhs of several customers were stolen from several ATMs during the past few days in Agartala.
     
    SBI's Regional Manager Dibyendu Chowdhury said that they have so far received complains from 45 customers that they lost their money due to the ATM hacking.
     
    Chowdhury said that the SBI has blocked a number of ATM and debit cards of its customers as precautionary measures.
     
    According to a cyber-technology expert, the ATM card cloning system comprises a spy camera, a memory card and a small data device to gather ATM and account details of bank customers. Recently, two Turkish nationals involved in the ATM hacking were arrested in Mumbai.
     
    Incidents of stealing money of a large number of bank customers from ATMs through ATM cloning devices took place in different parts of the country including Kolkata and Guwahati.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Deepak Narain

    3 weeks ago

    Hackers are always ahead of governments and other public institutions security personnel. It would be better, perhaps, if public authorities will employ them as handsomely paid guardians of public machinery like our own National Informatics Centre, etc.

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