Deposit insurance claims start when a lender, i.e. a bank, goes bust. The Deposit Insurance and Credit Guarantee Corporation (DICGC) has been paying such claims.
According to the current rule, if a bank sinks or goes bankrupt or its license is cancelled, then the customer can withdraw a maximum of Rs 5 lakh (deposit insurance limit) from his account. But the latest news is that the government is now considering increasing this limit of Rs 5 lakh. According to PTI news, a top official of the Finance Ministry said on Monday that the government is actively considering increasing the deposit insurance limit beyond the current Rs 5 lakh.
Work is going on the proposal
According to the news, just days after the New India Co-operative Bank scam came to light, the government is now considering it. In the presence of Finance Minister Nirmala Sitharaman, Department of Financial Services Secretary M Nagaraju announced that such a proposal is in the works. When the government approves, we will notify it. However, he refused to talk about the crisis in New India Co-operative Bank and said that the RBI is considering the matter.
The limit was increased in 2020
Deposit insurance claims start when a lender i.e. a bank goes under. Over the past few years, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has been paying such claims. This body collects premiums from banks for the cover it provides, and in the case of cooperative banks, most of the claims have to be made. After the PMC Bank scam, the DICGC insurance limit was increased from Rs 1 lakh to Rs 5 lakh in 2020. Economic Affairs Secretary Ajay Seth said that the cooperative banking sector is well regulated under the supervision of RBI and described the overall health of the sector as strong.
What was said in the case of New India Co-operative Bank
The Economic Affairs Secretary said that the crisis in one unit should not make anyone doubt the entire sector. The job of the regulator is to take action against the wrong entities. According to the report, 90 percent of the 1.3 lakh depositors of New India Co-operative Bank will have the entire amount covered under DICGC. The scam in the bank was detected during a physical inspection, which revealed that cash worth Rs 122 crore shown in the books was missing. The investigation revealed that the bank’s Finance General Manager Hitesh Mehta had allegedly given a large part of the embezzled amount to a local builder.
