NEW DELHI: In a major relief to the common man, the Finance Minister Nirmala Sitharaman on Saturday announced to raise the insurance cover on bank deposits to Rs 5 lakh from the current Rs 1 lakh.
The decision comes after the recent scam in the Punjab & Maharashtra Co-operative Bank (PMC) and its eventual closure, where thousands of depositors lost their money. The government and the RBI have faced severe criticism over capping the insurance at Rs 1 lakh over the past few months.
As per the guidelines of the Reserve Bank of India, deposits with all commercial banks and cooperative banks are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
This comes as a major relief for depositors, as under the DICGC norms each depositor in a bank was insured up to Rs 1 lakh for both the principal and interest amount on deposits held in a particular bank. Even if the total of all the deposits held by an individual in a bank is more than Rs 1 lakh, then the depositor will be able to get only Rs 1 lakh including both principal and interest amount if the bank goes bankrupt.