FinMin to discuss hiking deposit insurance limit with PSBs on March 4

Department of Financial Services (DFS) Secretary M Nagaraju will chair a review meeting with managing directors (MDs) and chief executive officers (CEOs) of public sector banks (PSBs) on March 4 to discuss several issues, including raising the deposit insurance limit, potentially up to ₹15 lakh, according to a senior government official. DFS is a part of the Ministry of Finance.

 

“The meeting is very crucial for the PSBs as the New India Co-operative Bank crisis happened last week. The views of PSBs will be sought on hiking the deposit insurance limit. Also, the meeting is expected to examine the interest rate strategies of PSBs in light of the recent 25 basis points (bps) reduction in the repo rate by the Reserve Bank of India (RBI),” said the official.

 

This is the first review meeting of the finance ministry with PSBs after the Union Budget 2025-26.

 

On Monday, Nagaraju said that the government is considering increasing the insurance cover limit on bank deposits from the current ₹5 lakh per depositor.

 

Deposit insurance is governed under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, which needs to be amended for raising the limit.

 

DICGC is a wholly owned subsidiary of the RBI, which administers deposit insurance covering commercial banks, including regional rural banks (RRBs), local area banks (LABs), and cooperative banks.

 

The cover was increased from ₹1 lakh to ₹5 lakh with effect from February 4, 2020, in the aftermath of the Punjab & Maharashtra Cooperative Bank crisis.

 

“The meeting is expected to review the MSME credit assessment model and the progress of the Mutual Credit Guarantee Scheme (MCGS), which facilitates term loans up to ₹100 crore for micro, small, and medium enterprises. Additionally, the meeting will assess performance of PSBs over recent quarters and the implementation of Budget announcements, including the development of a ‘Grameen Credit Score’ framework to meet the credit needs of self-help group (SHG) members and rural communities,” the official added.

 

According to data provided by the finance ministry, PSBs have shown a record net profit growth of 31.3 per cent year-on-year (Y-o-Y), achieving the highest-ever aggregate net profit of ₹1.3 trillion, and an aggregate operating profit of ₹2.2 trillion in the first nine months of the current financial year (M9FY25).

 

"The meeting may also address the strategy for stake dilution through qualified institutional placement (QIP), as announced by many banks. Additionally, discussions on cybersecurity and advancements in the digital space are expected," said a banker.

 

Last month, Nagaraju chaired a review meeting with heads of PSBs and private sector banks along with senior executives of Sidbi, Mudra Ltd, Indian Banks' Association, and National Credit Guarantee Trustee Company Ltd. He also reviewed the progress under various financial inclusion schemes, including Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Atal Pension Yojana (APY), Pradhan Mantri Mudra Yojana (PMMY), Stand Up India, and PM Vishwakarma. 

ON THE AGENDA

 

*  Review of MSME credit model  and progress of Mutual Credit Guarantee Scheme

 

*  Implementation of a framework to meet the credit needs of SHG members and rural communities

 

*  Strategy for stake dilution via QIPs

 

*  This is the first review meeting with PSBs after the Union Budget