Finance Minister Nirmala Sitharaman has announced that the depositorâ€™s insurance in banks is being increased five-fold to Rs 5 lakh. The earlier figure was Rs 1 lakh, which was set in 1993.
Depositorâ€™s insurance comes under the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the Reserve Bank of India. As per the RBI guidelines, deposits with all commercial banks and cooperative banks are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
All commercial banks including branches of foreign banks and co-operative banks are covered by the DICGC. At present, all co-operative banks are covered by the DICGC.
The decision comes after the recent scam in the Punjab & Maharashtra Co-operative Bank (PMC) and its eventual closure, where thousands of depositors lost their money. The issue worried many when the RBI put curbs on withdrawal.
RBI has faced severe criticism over capping the insurance at Rs 1 lakh over the past few months.
This issue also came up when Bengaluruâ€™s Sri Guru Raghavendra Sahakara Bank capped withdrawal at Rs 35,000.
This comes as a major relief for depositors as under the DICGC norms, each depositor in a bank was insured up to Rs 1 lakh for both the principal and interest amount on deposits held in a particular bank. Even if the total of all the deposits held by an individual in a bank is more than Rs 1 lakh, the depositor will be able to get only Rs 1 lakh including both principal and interest amount if the bank goes bankrupt.
With agency inputs