Currently, insurance cover on bank deposits is Rs 1 Lakh per depositor. (Photo Credit: File/Representational)
New Delhi :
In what could be termed as a big relief to depositors, the central government has enhanced insurance cover on bank deposits to Rs 5 lakh, a five-fold hike from the current Rs 1 lakh. In her maiden Budget 2020 speech, Union Finance Minister Nirmala Sitharaman proposed to enhance the bank deposit insurance in schedulled commercial banks to Rs 5 lakh per depositor.
As per the Reserve Bank of India or RBI guidelines, deposits in all commercial banks and cooperative banks are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC). Currently, this insurance cover for deposits is Rs 1 lakh, including the principal and interest amount, in case the bank goes bankrupt.
The government has now allowed DICGC to enhance the deposit insurance coverage to Rs 5 lakh. However, deposits under the Primary Cooperative Societies will not be covered under the DICGC.
As per the DICGC rules, if the total of all the deposits held by an individual in a single bank account – current, saving or fixed deposits - is more than Rs 5 lakh, the account holder will be able to get only Rs 5 lakh inclusive of principal and interest amount.
The announcement has come amid the recent PMC bank episode where thousands of account holders’ money is stuck. After today’s announcement, PMC account holders who have Rs 5 lakh in their account, they will get their money in case the bank goes completely bankrupt. Those who have more than the new insurance cover amount will only get Rs 5 lakh.