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In view of the hardship faced by depositors of Punjab & Maharashtra Cooperative (PMC) Bank, the Centre is planning to increase the insurance cover on bank deposits to ₹2 lakh. The government will announce the decision on February 1, according to a report by Economic Times ( ET ).
The Centre is going to double the insurance cover by incorporating amendments to the Deposit Insurance & Credit Guarantee Corporation (DICGC) Act. Currently, the DICGC Act, 1961, provides insurance cover of up to ₹ 1 lakh for both principal and interest. Rest of the amount gets forfeited if a bank collapses. The cover was last fixed 25 years ago.
According to Ashwin Parekh, proprietor of Ashvin Parekh Advisory Services, increasing the insurance cover is the need of the hour after witnessing the collapse of the PMC Bank, ET reported. The Centre is also planning to provide emergency access to deposit insurance to customers when a bank fails. However, the government has not yet revealed who would bear the cost of a higher insurance premium.
In November 2019, Finance Minister, Nirmala Sitharaman also indicated to bring legislations on raising the cap on insurance cover on bank deposits from the current ₹1 lakh and regulating multi-state cooperative banks.
According to a report by State Bank of India, deposit insurance coverage in India is one of the lowest at 0.9 times India's per capita income, Outlook reported.
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