Govt to increase bank deposit insurance from current Rs 1 lakh

NEW DELHI: The Government plans to increase the deposit guarantee limit in case of bank failure from existing Rs 1 lakh. Legislation in this regard is likely in the winter session of Parliament, Finance Minister Nirmala Sitharaman said here on Friday. 

“It will be increased from the current limit,” Sitharaman said, without specifying the amount of increase. A representation by Sahakar Bharati, which represents cooperatives recently had sought an increase to Rs  5 lakh, while officials said given the fall in the value of the Rupee since 1993 when the deposit insurance limit had been last set, it could be raised up to Rs 7 lakh.

This deposit insurance offered by Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of RBI, covers all types of bank deposits - savings, fixed and recurring deposits – and the cover premium is paid for by all banks.

The last time the Financial Resolution and Deposit Insurance (FRDI) had been taken up two-and-half years back, the Government had decided to shelve it after a brouhaha over a "bail-in" clause which theoretically allowed beleaguered banks and financial institutions to scoop up depositors' money to stop them from going bust.

However, the Minister said “there has been a course since then” and indicated that the clause would be dropped in the new bill which could come before Parliament.