The government is considering increasing the insurance limit on deposits in bank accounts from ₹5 lakh to ₹10 lakh. The Finance Ministry is active in this direction and a decision may be taken on this in the next six months.
The government is considering increasing the limit of insurance on customer deposits in bank accounts. Currently, depositors get insurance protection on an amount of up to ₹ 5 lakh. This limit can be increased to ten lakh rupees. According to a report by Business Standard, this limit can be increased in the coming six months. A senior official of the Finance Ministry informed on the condition of anonymity that the government is working actively in this direction.
Deposit insurance is the security amount that the depositor gets in case of bankruptcy of the bank. Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly owned subsidiary of the Reserve Bank of India. It manages deposit insurance in the country’s commercial banks, regional rural banks, local banks and cooperative banks. Earlier in February, Financial Services Secretary M Nagaraju had said that the proposal to increase deposit insurance is being considered and the Finance Ministry will notify it after the Cabinet takes a decision.
The official said that the Finance Ministry is considering several important aspects before deciding the new limit. It is being seen how many account holders will benefit from increasing the insurance limit, how much of the total deposit amount will come under this purview and how much guarantee the government is in a position to give for this. Apart from this, the final decision will also depend on the current income level and the currently insured deposits.
In response to a recent question on this subject, RBI Governor Sanjay Malhotra said that there is no formal proposal in this regard yet. He said that the current deposit insurance limit is ₹ 5 lakh, which was increased from ₹ 1 lakh about five years ago. Today, about 97% of bank account holders are covered under this limit.
Insurance limit increased many times before
The deposit insurance scheme in India was introduced in 1962, when the limit was fixed at ₹1,500 per depositor. It was then increased from time to time. It was increased to ₹20,000 in 1976, ₹30,000 in 1980 and ₹1 lakh in 1993. Later, it was increased to ₹5 lakh in February 2020 due to the Punjab & Maharashtra Cooperative Bank crisis.
