FM raises deposit insurance cover five times to Rs 5 lakh

To address concerns of small depositors over failure of banks, Finance Minister Nirmala Sitharaman on Saturday proposed to raise the insurance cover on saving deposits five times to Rs 5 lakh.

The decision assumes significance in the wake of a scam in the Punjab and Maharashtra Cooperative (PMC) Bank affecting lakhs of customers who are facing difficulties in withdrawing their money due to restrictions imposed by the Reserve Bank of India.

"I wish to inform this august House that robust mechanism is in place to monitor the health of all Scheduled Commercial Banks and that depositors' money is safe.

"Further, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has been permitted to increase Deposit Insurance Coverage for a depositor, which is now Rs 1 lakh to Rs 5 lakh per depositor," she said in Budget 2020-21.

At present, bank depositors get an insurance cover of Rs 1 lakh on their amount by the Deposit Insurance and credit Guarantee Corporation if a bank fails. However, deposits maintained with different banks are not clubbed.

To strengthen the Cooperative Banks, she said, "amendments to the Banking Regulation Act are proposed for increasing professionalism, enabling access to capital and improving governance and oversight for sound banking through the RBI."