More than a month of waiting for 16 lakh depositors is leading to a dangerous position of loss of faith in banks. The Cooperative banks have more than 13 crore small depositors. RBI has enough powers. When it has appointed a retired CGM to take some steps it should allow depositors to withdraw their money in case of need. It should assure that their money is safe.
In the past, it had forced Public as well as Private banks to take over commercial banks. In 1985 Lakshmi Commercial bank was taken over by Canara Bank. In 2004 Global Trust Bank was taken over by Oriental Bank of Commerce. In 2008 Centurian Bank of Punjab was taken over by HDFC bank. There are 18 similar take overs . All under the supervision of RBI. Why RBI and Govt are indifferent now? Do they want the weaker banks to die as recommended by Narasimhan committee? That will lead to loss of faith in the banks? Is the Govt moving towards a financial crisis which can bring in a Financial Emergency? The Govt has to answer.
Deposit Insurance and Credit Guarantee Corporation (DICGC) cover was increased from Rs.1500 in 1962 to Rs.5000 in 1968, Rs.10,000 in 1970, Rs.20,000 in 1976, Rs.30,000 in 1980 and Rs,1,00,000 in 1993. It does not require any new law like Financial Resolution and Deposit Insurance (FRDI). DICGC Act empowers the Corporation to increase the limit with prior approval of the central Govt. DICGC is headed by RBI Dy Governor and the board has a representative of the Finance Ministry. As on March 2018 DICGC has Fund Surplus of Rs.760.64 billion. Why there is a delay in increasing the cover? The US has $2,50,000 and most of the countries cover more than $75,000 whereas in India it is only $1523. If the Govt doesn’t act immediately depositors will revolt and there will be a run on banks.
Thomas Franco is former General Secretary, All India Bank Officers’ Confederation (AIBOC).