Government To Hike Minimum Insurance For Bank Deposits, Says Finance Minister
Finance Minister Nirmala Sitharaman speaks during 6th World Congress on Rural and Agricultural Finance, in New Delhi. (Source: PTI)

Government To Hike Minimum Insurance For Bank Deposits, Says Finance Minister

The government is going to hike minimum deposit insurance of Rs 1 lakh for depositors after 26 years.

The proposal will be considered by the Union Cabinet first, and once approved, the government will introduce the changes in the winter session of the Parliament commencing Nov. 18, Finance Minister Nirmala Sitharaman said.

This comes after Reserve Bank of India capped withdrawals by customers of Punjab & Maharashtra Cooperative Bank and placed the lender under certain restrictions.

Currently, when a bank fails, deposits worth Rs 1 lakh, including principal and interest, are insured.

There has been a fall in the share of insured deposits as compared to total assessable deposits. Insured deposits stood at Rs 33.7 lakh crore, constituting 28.1 percent of all assessable deposits in financial year 2018-19, according to data by Deposit Insurance and Credit Guarantee Corporation.

The government is looking to make necessary changes in the Banking Regulation Act for better supervision and regulation of cooperative banks for their prudent functioning, Sitharaman said, adding that these amendments will also be introduced in the winter session of the Parliament. Every relevant Act would be looked into for amendment, she said.

“If they (co-operative banks) are only under Cooperative Banks Act, prudential norms cannot be applied on them,” she said.

In an effort to provide relief to PMC Bank depositors, the government has also held discussions with the RBI to check if the confiscated property of promoters of Housing Development and Infrastructure Ltd. and bank officials can be given to the central bank. The RBI, in return, can then compensate the depositors of PMC Bank. “Understanding if there is a possibility and this benefit can be extended to the PMC depositors,” Sitharaman said, adding that the government is looking at the laws that govern the confiscation of properties by agencies, and if it is possible to do so.

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