The Indian government is contemplating increasing the current ₹5 lakh deposit insurance limit, as disclosed by M Nagaraju, the Secretary of the Department of Financial Services during a press conference on Monday. Nagaraju mentioned that the proposal is actively being considered and will be officially announced after government approval.
If a bank fails, depositors can claim insurance through DICGC which has settled such claims over the years. Premiums from banks fund this insurance. Cooperative lenders have made most claims. DICGC raised the insured limit post the PMC Bank scam of 2020, from ₹1 lakh to ₹5 lakh.
The debate on raising deposit insurance limit surged after the New India Co-operative Bank scam. On Feb 13, the RBI halted the bank’s operations, including new loans and withdrawals, for six months, replacing the board with an administrator. Reports indicate that 90% of the bank’s 1.3 lakh depositors will have their full sums protected by DICGC.
Until April 2021, depositors could only access cover if their banks went into liquidation, but Budget 2021 changed rules for immediate access to insurance of up to ₹5 lakh for banks under moratorium. RBI Deputy Governor M Rajeshwar Rao proposed raising coverage due to factors like deposit growth, economic growth, inflation, and income increase.
Sources News From Various Digital Platforms, Websites, Journalists, And Agencies.
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