Finance Minister Nirmala Sitharaman on Saturday announced that deposit insurance will now be increased to Rs 5 lakh per bank account from the current limit of Rs 1 lakh.
This means that in case of bank failure or liquidation, a depositor will get up to Rs 5 lakh as opposed to previous Rs 1 lakh, before the bank pays other parties.
Currently, as per the RBI guidelines, deposits with all commercial banks and cooperative banks are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC). Only Primary Cooperative Societies are not covered under DICGC.
Prior to this year’s budget, it was expected that the insurance coverage would be increased to Rs 2 lakh.
“There is robust mechanism to monitor the health of all scheduled commercial banks and we want to assure depositors that their deposits are absolutely safe,” FM Nirmala Sitharam said while presenting the budget.
This comes after the recent PMC Bank scam where a multi-crore scam came to light following which the withdrawal was initially capped at Rs 1,000, causing panic and distress among depositors.