Insurance cover on bank deposits increases from Rs one lakh to five lakh

Insurance
cover on bank deposits has been increased to five lakh rupees from one lakh
rupees. The decision came into effect from yesterday.

The Reserve
Bank of India (RBI) said in a statement that the cover is provided by the
Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned
subsidiary of the RBI. This, the RBI said, has been done with a view to
providing a greater measure of protection to depositors.

Finance
Minister Nirmala Sitharaman on Saturday had made the announcement regarding
increasing insurance cover to five lakh rupees in her Budget Speech.

Earlier,
Finance Secretary Rajiv Kumar said the Department of Financial Services has
given approval for raising deposit insurance cover.

The move
will help boost confidence of people in the banking system.

As the
insurance cover stands increased, the banks will pay a premium of 12 paise
against 10 paise per 100 rupees deposited.

The deposit
insurance scheme covers all banks operating in India, including private sector,
cooperative and even branches of foreign banks. There are some exemptions such
as deposits of foreign governments, deposits of Central and State Governments,
and inter-bank deposits. Deposit insurance was static at one lakh rupees since
1993.

The demand
for raising the deposit insurance limit gained momentum after a run on a
large-sized multi-state cooperative bank, the Punjab and Maharashtra
Cooperative Bank (PMCB) after it came under an RBI Administrator for financial
irregularities pertaining to loans to real estate firm HDIL.