NEW DELHI: The recent scam in the Punjab and Maharashtra Cooperative Bank (PMC), which has left thousands of depositors stranded with little access to their money, indicates a pressing need to substantially increase the mandated deposit insurance cover, said a report by SBI Research on Monday.
Currently, depositor insurance under the Reserve Bank of India (RBI) regulations provided by the Deposit Insurance & Credit Guarantee Corporation (DICGC) stand at a maximum of just Rs 1 lakh, for both principal and interest as on the date of the bank’s liquidation or cancellation of banking license.
“The current upper limit of Rs 1 lakh per depositor, we believe, has outlived its shelf life and there is a need to revisit it,” SBI Research said, adding the DICGC coverage should be revised and bi-furcated into two categories: desirable coverage of at least Rs 1 lakh for savings deposits which are about 90 per cent of total accounts, and a desirable coverage of at least Rs 2 lakh for term-deposits which are about 70 per cent of total accounts.
A separate provision for senior citizens should also be made, it recommended.
“This revision...becomes all the more desirable as the country offers no social security to senior citizens and retired people who thus mostly keep their savings in fixed deposits,” SBI Research said, noting small savers also have fixed deposits with the same intent.
“In the extreme event of a bank failure, it is unfair if such hard-earned money is forfeited,” it said. The RBI had imposed restrictions on urban cooperative bank PMC for six months, following the unearthing of serious irregularities, including the suppression of real bad loan exposure to real estate developer HDIL.