Take the pledge to vote

For a better tommorow#AajSawaroApnaKal
  • I agree to receive emails from News18

  • I promise to vote in this year's elections no matter what the odds are.
  • Please check above checkbox.

    SUBMIT

Thank you for
taking the pledge

Vote responsibly as each vote counts
and makes a diffrence

Disclaimer:

Issued in public interest by HDFC Life. HDFC Life Insurance Company Limited (Formerly HDFC Standard Life Insurance Company Limited) (“HDFC Life”). CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101 . The name/letters "HDFC" in the name/logo of the company belongs to Housing Development Finance Corporation Limited ("HDFC Limited") and is used by HDFC Life under an agreement entered into with HDFC Limited. ARN EU/04/19/13618
LIVE TV DownloadNews18 App
News18 English
Powered by cricketnext logo
News18 » Business
2-min read

Centre Mulling to Raise Deposit Insurance Cover to Rs 3 Lakh in First Revision Since 1993

The decision will be taken only after all the stakeholder including banks, the DICGC and the Reserve Bank of India (RBI) have been consulted, and is only in its initial stages.

News18.com

Updated:October 16, 2019, 2:17 PM IST
facebookTwitter Pocket whatsapp
Centre Mulling to Raise Deposit Insurance Cover to Rs 3 Lakh in First Revision Since 1993
A file photo of the ministry of finance, New Delhi.

The finance ministry is discussing raising deposit insurance cover to Rs 3 lakhs from the existing Rs 1 lakh. The cover is paid to costumers who whose deposits lie with a bank in the event that the bank fails to return them.

The insurance cover for depositors was last revised in 1993, from Rs 30,000 in 1980 to Rs 1 lakh.

The decision will be taken only after all the stakeholder including banks, the DICGC and the Reserve Bank of India (RBI) have been consulted, and is only in its initial stages.

DICGC, a wholly-owned subsidiary of the RBI, provides this insurance cover for deposits and banks are required to pay premium to it. In FY19, DICGC collected Rs 12,043 crore as premium and settled Rs 37 crore worth claims.

The recent Punjab and Maharashtra Co-operative (PMC) Bank crisis raised questions of deposit insurance in the country, and the profile of customers has altered drastically since 1993, a report by the State Bank of India found.

The report further says that the level of insured deposits as a percentage of accessible deposits has declined from 75 percent in 1982 to 28 percent in the previous fiscal year. There is a dire need to revisit the insurance coverage of bank deposits, the report suggests.

Deposit insurance: history

The concept of insuring deposits kept with banks received attention for the first time in 1948 after the banking crisis in Bengal. The issue came up for reconsideration in 1949 but was held in abeyance till the RBI set up adequate arrangements for inspection of banks.

It was only after the failure if the Pilai Central bank and the Laxmi Bank in 1960 that a serious thought to insuring deposits was given by RBI and the central government. The Deposit Insurance Act, 1961 came into force on January 1, 1962. Deposit Insurance Scheme under it was initially extended to all functioning commercial banks.

This included commercial banks and branches of foreign banks operating in India. Later, cooperative banks were also included in this list.

However, expert committees formed later called for an increase in the level of deposit insurance. For instance, the M Damodaran-led Committee on Customer Services in Banks set up by the RBI recommended in 2011 that the deposit insurance be increased to Rs 5 lakh, which was set up by the RBI, recommended in its report in 2011 a five-time increase in the cap to Rs 5 lakh.

Reasons to increase depositor insurance cover now

The lender was also found to have violated the RBI’s group exposure norms. Its exposure to the realty firm Housing Development & Infrastructure (HDIL) is being investigated by the authorities including the Economic Offences Wing (EOW).

The RBI capped withdrawals from the PMC Bank beginning in September, placing certain operational restrictions on it. The withdrawal was capped at Rs 1,000 in the beginning. This went up to Rs 10,000, Rs 25,000 and finally was increased to Rs 40,000 on October 14.

PMC Bank came under fire for fraud and misreporting of bad loans.

If deposit insurance is hiked, the direct beneficiary is the customer. In the rare event of a bank failure when the deposit amount is forfeited, an account holder will be guaranteed up to the Rs 3 lakh limit if it is finalised.

However, this will mean that the premium paid by the banks for the insurance cover will also go up. Currently, DICGC charges up to 10 paise for every Rs 100 on an annual basis.

Get the best of News18 delivered to your inbox - subscribe to News18 Daybreak. Follow News18.com on Twitter, Instagram, Facebook, Telegram, TikTok and on YouTube, and stay in the know with what's happening in the world around you – in real time.

Read full article
Next Story
Next Story

facebookTwitter Pocket whatsapp
Most Active
Company Price Change %Gain
SBI 304.80 -0.65
Yes Bank 68.85 0.95
ICICI Bank 490.75 1.03
Indiabulls Hsg 212.50 -2.63
Reliance 1,464.70 -0.52
Company Price Change %Gain
Narayana Hruda 291.80 -3.25
Cipla 450.30 0.46
Yes Bank 68.85 0.88
Cholamandalam 307.00 3.26
Indiabulls Hsg 212.40 -2.70
Top Gainers
Company Price Change %Gain
Infosys 707.30 2.31
HCL Tech 1,152.45 1.22
Bajaj Finance 4,192.30 1.15
ICICI Bank 490.75 1.03
Yes Bank 68.90 1.03
Company Price Change %Gain
Infosys 707.40 2.34
Bajaj Finance 4,192.75 1.18
ICICI Bank 490.90 1.05
Yes Bank 68.85 0.88
Maruti Suzuki 7,217.05 0.86
Top Losers
Company Price Change %Gain
Bharti Infratel 201.85 -7.49
IndusInd Bank 1,360.80 -3.78
Bharti Airtel 357.00 -3.15
UltraTechCement 4,015.00 -2.44
Tata Motors 166.30 -2.52
Company Price Change %Gain
IndusInd Bank 1,360.90 -3.75
Bharti Airtel 356.95 -3.13
Tata Motors 166.40 -2.46
Vedanta 144.75 -2.36
Coal India 202.80 -2.12

Live TV

Countdown To Elections Results
To Assembly Elections 2018 Results