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Scrap deposit insurance: AIBEA tells FM
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SME Times News Bureau | 19 Nov, 2019
Even as the government is mulling increasing the insurance cover for
bank deposits, the All India Bank Employees' Association (AIBEA) has
demanded scrapping of such insurance cover for public sector bank
deposits.
In a letter to Finance Minister Nirmala Sitharaman on
Monday, the General Secretary of AIBEA said as per the Section 45 of
Banking Regulations Act, 1947, the government and the Reserve Bank of
India (RBI) have the powers, in public interest, to amalgamate any bank
with another bank.
He said this would avert bank closures and consequent loss of deposits of the customers.
"Further,
with the nationalisation of major banks in 1969 and 1980, the public
sector banks also enjoy the sovereign guarantee of the government,"
Venkatachalam said.
According to him, there is no question or
possibility of any commercial bank getting closed or liquidated as per
Section 45 of the Banking Regulations Act.
"Hence we strongly
feel and opine that the deposits of commercial banks, importantly, the
public sector banks, need not be covered by the Deposit Insurance Scheme
at all," he said.
According to Venkatachalam, the commercial
banks paid a premium of Rs 11,190 crore during 2018-19 and Rs 10,350
crore the previous year to Deposit Insurance and Credit Guarantee
Corporation (DICGC) with zero claims.
Venkatachalam said the
total amount of deposits under 200 crore bank accounts were Rs 120 lakh
crore whereas the deposit insurance cover is only for Rs 33.70 lakh
crore or 28 per cent.
He said while the premium is calculated on
the entire Rs 120 lakh crore of commercial bank deposits, the insurance
cover for bank deposit is only up to Rs 1 lakh.
In the case of
public sector banks, the total deposit is about Rs 70 lakh crore and the
insurance cover is only for Rs 28 lakh crore or 30 per cent of the
total deposits.
Venkatachalam said, as on 31-3-2019, the Deposit
Insurance Fund of DICGC is Rs 97,350 crore including a surplus of Rs
87,890 crore. The claims settled so far since 1962 is only Rs. 5,120
crores and that too for the cooperative banks.
"Out of 2,098
banks covered by the DICGC, 1941 banks are co-operative banks. Only
these banks are facing problems of closure and liquidation and the
deposits of these banks need to be covered by DICGC. Even in the case of
these banks, only to extent of deposits covered by the insurance cover,
premium should be charged and not on the total assessable deposits
which is much higher," Venkatachalam told the Finance Minister.
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