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DICGC cannot stop insuring deposits: Nutan bank chief

Deposit insurance body may have exhausted funds: Adhyaru

Our Regional Bureau  |  Ahmedabad 

Taking a defiant stance, the Ahmedabad-based has stated that the (DICGC) cannot refuse to accept insurance premium payments made by the co-operative banks.
Ltd (NNSB) is one of the eight Gujarat-based multi state co-operative banks that have received a letter from the DICGC that their deposits are no longer insured.
"There is no question of deposits of multi state co-operative banks not being insured and we do not need to even place copies of the letter in our branches. According to the law, an insurance company cannot refuse to accept insurance premium payment and this applies to us too," said Parthivkumar Adhyaru, chairman,
Going a step further, Adhyaru alleged that he suspects the DICGC to have exhausted its funds and that is why it is denying insured payments to banks. When asked if he had any proof of the DICGC not having sufficient funds, Adhyaru said: "I do not have any proof, but it appears like that."
DICGC has raised around Rs 8,000 crore through insurance premium from banks across the country.
Adhyaru said that the DICGC had inferred that multi state co-operative banks are not insured under provisions of section 2(g)(g) of the DICGC Act after the amendment in the Multi State Co-operatives Societies Act in 2002.
"The question of insurance cover has arisen after the Supreme Court judgment on October 29, 2003, as a result of which the RBI canceled the licence of Apex Bank of Maharashtra and Goa. This applies just to that one particular bank and not to all multi state co-operative banks," he said.
Adhyaru added that the main difference in the revised MSCS Act is that the power to suspend the board of directors has shifted from the registrar to the minister.
Adhyaru said that the entire DICGC issue was a fallout of a friction between the elected and administrative establishments.
"It appears to be a fight between the elected and appointed establishments. But this should not affect the functioning of multi state co-operative banks. Although does not have branches outside the state, it has registered with the Central Registrar of Co-operatives as some of its shareholders and loanees are from other states."
To ensure that a larger portion of bank deposits are insured, has demanded the increase of the insured amount per account from the current Rs 1 lakh to Rs 5 lakh. At present, depositors get back up to Rs 1 lakh, which is insured with the DICGC, in the event of
Banks currently pay eight paise per Rs 100 of deposits. "But we are paying this rate of premium on the entire amount of deposits that we have, and not just on the Rs 1 lakh which is insured. Our demand is that the insured amount be increased from Rs 1 lakh to Rs 5 lakh, which will mean that in case a bank is liquidated, a larger number of depositors will get their entire deposits back," said Adhyaru.