Government Considers Raising Insurance Cover On Bank Deposits

At present, bank depositors get an insurance cover of Rs 1 lakh on their amount by the Deposit Insurance And Credit Guarantee Corporation.

Government Considers Raising Insurance Cover On Bank Deposits

The new legislations will be brought during the winter session of Parliament, FM said.

The government is considering proposals on raising insurance cover on bank deposits from the current Rs 1 lakh and regulating multi-state cooperative banks, Finance Minister Nirmala Sitharaman said on Friday. The new legislations in this regard will be brought during the winter session of Parliament starting Monday, she added. At present, bank depositors get an insurance cover of Rs 1 lakh on their amount by the Deposit Insurance And Credit Guarantee Corporation.

Here are 10 things to know about insurance limit on bank deposits:

  1. "I will be going to Cabinet to increase the insurance limit from current Rs 1 lakh on deposit in banks and if the Cabinet approves it, we will move it in the upcoming winter session of Parliament", Ms Sitharaman said at a media interaction. 

  2. Ms Sitharaman, however, did not mention what the new insurance limit would be.

  3. Deposit insurance is a protection cover against losses accruing to bank deposits if a bank fails financially and has no money to pay its depositors.

  4. In 1993, the cover was raised from Rs 30,000 to Rs 1 lakh.

  5. In September this year, the central bank imposed restrictions on the Punjab & Maharashtra Co-operative (PMC) Bank citing major financial irregularities. 

  6. Putting the co-operative bank under its lens, the RBI barred PMC Bank from renewing or granting any loans, or making investments without its prior approval.

  7. The central bank capped the withdrawals from PMC Bank accounts to Rs 1,000 per customer for six months.

  8. Since then, the RBI has raised the withdrawal limit on four instances. PMC Bank account holders can now withdraw up to Rs 50,000 in one or multiple tranches till the RBI restrictions are in place. 

  9. The government has no plans to cut spending on welfare schemes and would encourage all departments to spend the entire funds provided in the Budget.

  10. Earlier on Friday, the government notified rules under the insolvency law to deal with issues pertaining to systemically important financial service providers, excluding banks. The latest move comes against the backdrop of financial stress faced by certain entities that are into financial services.



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