The central government is considering increasing the limit of insurance on the money deposited by bank account holders. Currently this limit is ₹ 5 lakh, which can be increased to ₹ 10 lakh.
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The central government is considering increasing the limit of insurance on the deposits of bank account holders. Currently this limit is ₹ 5 lakh, which can be increased to ₹ 10 lakh. According to government sources, a decision can be taken on this in the next six months. Although no final decision has been taken yet, discussions are in full swing on the insurance limit of up to ₹ 10 lakh. Along with this, it is also being seen how many account holders will get the benefit of this and what is the government’s capacity to give guarantee. At present, in case of any bank sinking, the depositor gets a maximum insurance of up to ₹ 5 lakh.
Why was this step taken?
This proposal moved forward rapidly after the crisis of New India Cooperative Bank in February this year. RBI had banned lending and deposit withdrawal on this bank. After this, the government started talking about increasing the deposit insurance. Finance Ministry official M. Nagaraju also indicated in February that increasing the insurance limit is being considered. It will be taken official form after the cabinet decision.
How does insurance work?
The responsibility of deposit insurance lies with DICGC (Deposit Insurance and Credit Guarantee Corporation), which is a subsidiary of RBI. This institution provides insurance protection to deposits in all commercial banks, cooperative banks and rural banks of the country. If a bank closes, DICGC returns the money to the depositor within 90 days. In this process, the bank has to send the customer data to DICGC in 45 days, and the money is returned in the next 45 days.
What is included in the insurance?
– The insurance limit is applicable per person, per bank.
– Savings account, fixed deposit (FD), current account and recurring deposit are all included.
– Both the principal amount and interest are insured up to ₹5 lakh. For example, if someone has ₹4.95 lakh principal and ₹5,000 interest, then a total of ₹5 lakh will be protected.
The limit has been increased earlier also
Deposit insurance in the country was started in 1962 and at that time the insurance limit was Rs 1,500 per depositor. This limit was increased to Rs 20,000 in 1976, Rs 30,000 in 1980 and Rs 1 lakh in 1993. In February 2020, DICGC increased the insurance limit from Rs 1 lakh to Rs 5 lakh, which was the first major increase since 1993. This step was taken keeping in mind the protection of the interests of depositors after the Punjab and Maharashtra Co-operative (PMC) Bank crisis.
– ₹20,000 in 1976
– ₹30,000 in 1980
– ₹1 lakh in 1993
– ₹5 lakh directly in 2020 (after PMC Bank crisis)
More cases in cooperative banks
RBI data shows that in 2023-24, DICGC settled claims worth ₹1,432 crore, which were related to cooperative banks only. At present, 1,997 banks are registered under DICGC, including 140 commercial and 1,857 cooperative banks.
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