Government plans to increase the limit of deposit insurance; Know how will it benefit you

The government is also very seriously considering increasing the deposit insurance amount very much. The deposit insurance amount is currently Rs 5 lakh. It means that if there is a bank default now, customers depositing money there will have up to Rs 5 lakh insured. But taking into consideration the inflation, etc., this is very little, taking everything into consideration. It is demanded to increase it on a regular basis.

On this, Department of Financial Services Secretary M. Nagaraju confirms that there is contemplation of increasing the deposit insurance of Rs 5 lakh that is currently there. It was only after the New India Co-operative Bank fraud allegedly occurred that Nagaraju said that such a proposal was in the works.

"As soon as the government approves, we will issue a notification," he said in the presence of Finance Minister Nirmala Sitharaman. However, Nagaraju refused to comment on the crisis of the New India Co-operative Bank. He said that the RBI is looking into the matter.

Deposit insurance claims start when a lender goes under. In the last few years, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has been paying such claims. The body collects premiums from banks for the 'cover' it provides and most of the claims have been made in the case of cooperative lenders. According to reports, the entire amount of 90 percent of the 1.3 lakh depositors of New India Co-operative Bank will come under DICGC.

RBI has found serious flaws in the functioning of the New India Co-operative Bank. It dissolved the bank's board for one year. The bank's operations will now be overseen by an RBI-appointed administrator. A committee of advisors has also been appointed, which will assist the administrator in the functioning. The RBI has also banned deposits and withdrawals from the bank. This means that customers will not be able to withdraw their money until the RBI ban is lifted.

The Mumbai Police has also registered a case of embezzlement of Rs 122 crore against the bank's general manager and head of accounts and their associates. This will now be investigated by the Mumbai Police Crime Branch (EOW).

In September 2019, with the help of a whistle-blower, the RBI came to know that PMC Bank was using fake bank accounts to give a loan of about Rs 6500 crore to a Mumbai real estate developer. To avoid this, the RBI imposed some restrictions on the withdrawal of money on 24 September 2019.

After this, the demand for increasing the deposit limit intensified. The government had increased the insurance limit from Rs 1 lakh to Rs 5 lakh in 2020 after the PMC Bank scam.