MUMBAI: A depositors’ body has moved the Bombay high court for a direction that in the event of the winding up or liquidation of an insured and licensed bank, its customers shall receive a refund of their entire deposits.
Bank Depositors Protection and Welfare Society has made the Centre – through the finance ministry – the Reserve Bank of India and the Deposit Insurance and Credit Guarantee Corporation respondents.
It has also urged HC to direct that section 16 (liability of the Corporation in respect of insured deposits) of the DICGC Act,1961 is ultra vires to the limited extent of imposing restrictions on refund of the entire deposit amount by use of the nomenclature ‘specified amount’, which is specified from time to time. Currently, the specified amount for refund is Rs 5 lakh.
The petition is in respect of The City Co-op Bank Ltd. RBI placed it under restriction in April 2018. In August 2021 the bank issued an expression of interest for its reconstruction. In September 2021 the bank issued a circular that the RBI had asked it to create a basic claim list of depositors for withdrawals up to Rs 5 lakh. There are 91,000 depositors and a majority of them have over Rs 5 lakh deposit. “.. accepting the said specified amount will be tantamount to causing grave loss to the life saving of depositors of the bank,” the petition adds.
