The government is examining a proposal to up the deposit insurance limit, according to M Nagaraju, Secretary (Department of Financial Services), Finance Ministry.
The last time the deposit insurance limit was revised was in February 2020. Then it was raised to ₹5 lakh from ₹1 lakh. This came in the wake of the Mumbai-based Punjab and Maharashtra Cooperative (PMC) Bank being hit by a massive fraud and depositors taking to the streets to get their savings back.
The government’s latest move to revisit the deposit insurance limit comes in the backdrop of another Mumbai-based cooperative Bank – the New India Cooperative Bank (NICB) — being hit by a scam recently. Hapless depositors cannot withdraw even one rupee from the bank as it is facing liquidity issues.
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Nagaraju observed that increasing the deposit insurance limit is under consideration of the government. As and when the Government approved it, it will be notified, he added.
While the RBI put NICB under directions on February 13 and superseded its board of directors and appointed an administrator on February 14, it said eligible depositors would be entitled to receive deposit insurance claim amount of their deposits up to ₹5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) based on submission of willingness by the depositors concerned and after due verification.
Currently, banks pay an insurance premium of 12 paise per ₹100 deposit to DICGC.