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Deposit insurance cover to be hiked from Rs 1 lakh: FM
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SME Times News Bureau | 15 Nov, 2019
Finance Minister Nirmala Sitharaman on Friday said cooperative banks
would be under the RBI's prudential norms to prevent any PMC Bank-like
situations, there will be a rise from Rs 1 lakh in deposit insurance
cover for account holders in the new FRDI Bill and the Finance Ministry
will shortly move the proposal before the Cabinet.
"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", she said at a media
interaction.
Sitharaman, however, did not say what would be the new deposit insurance limit.
The
cover was raised from Rs 30,000 to Rs 1 lakh in 1993, and now after the
collapse of Punjab & Maharashtra Co-operative Bank, there is a
demand that the limit should be increased. The cooperative banks body
has proposed Rs 5 lakh cover for deposits.
The need to raise the
limit was felt after the scam in the PMC Bank came to light where
harried depositors wanted safety of their hard-earned money. The PMC
Bank crisis saw a substantial portion of depositors' money getting
blocked with the bank. Many fear the worse is yet to come if the bank
goes in for liquidation. That raised the question of how safe is the
deposit in such a situation.
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 and has to go in for
liquidation. The Deposit Insurance and Credit Guarantee Corporation
covers depositors of all commercial banks and foreign banks operating in
India, state, central and urban co-operative banks, local area banks
and regional rural banks provided the bank with which the deposit is
made has bought the cover from the corporation.
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