The government may increase the coverage limit on bank deposits from Rs 5 lakh to Rs 10 lakh in the next 6 months. A senior official of the Finance Ministry said that brainstorming is going on in this regard. However, a final decision has not been taken yet on what the new limit will be.
According to the official, many aspects are visible in imposing the new limit. Such as how many account holders will be covered, how much amount will be insured and what kind of guarantee the government will give. The Finance Ministry will announce this after the cabinet decision.
In fact, the government currently provides deposit coverage (deposit insurance) of Rs 5 lakh to customers in case of bank closure or collapse under the Deposit Insurance and Credit Guarantee Corporation Act (DICGC). Depositors receive this amount within 90 days.
Deposit coverage was brought to the US in 1962. At that time there was a limit of Rs 1,500 per account holder. It was extended from time to time. 20 thousand rupees in 1976, 30 thousand rupees in 1980 and one lakh rupees in 1993. It was increased to Rs 5 lakh in February 2020 following the Punjab and Maharashtra Co-operative Bank crisis.
Let us tell you that if the bank is going bankrupt then the account holder gets the money back from his deposit amount up to the prescribed limit. The Reserve Bank had taken strict measures against the New India Co-operative Bank in February 2025. After this the discussion on increasing bank deposit coverage intensified.
In 90 days you get your deposit if your bank is going bankrupt or going to a moratorium for some reason. The affected financial institution has to send the account holders’ information to the DICGC in 45 days. Over the next 45 days he returns the money to the account holders.
If a financial institution closes or goes bankrupt, DICGC first asks the financial institution for the list of customers and their deposit records.
After this DICGC provides the sum assured to the financial institution.
Then the financial institution sends the sum assured to the accounts of its customers based on their deposits.
All commercial banks including branches of foreign banks operating in India, local local banks and local rural banks are insured by DICGC.
When registering any financial institution the DICGC gives them the published form, which contains records about the sum assured the depositors receive. If a depositor needs records about it, he can ask about it from the valid branch of the bank.
Deposit Insurance and Credit Guarantee Corporation i.e. DICGC is an institution owned by the Reserve Bank, which provides insurance cover on bank deposits.
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