Representative image (Photo: Mint)
Representative image (Photo: Mint)

'No information' on raising 1 lakh insured amount limit on bank deposits: RBI-owned subsidiary

  • The revelation from Deposit Insurance and Credit Guarantee Corporation assumes gravity with numerous instances of different banks falling victim to frauds
  • FM Sitharaman last month said the government plans to bring in legislation on raising insurance cover on bank deposits from the current 1 lakh

New Delhi: There is "no information" on raising the 1 lakh insurance limit on bank deposits, according to the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the Reserve Bank of India.

Finance Minister Nirmala Sitharaman last month said the government plans to bring in legislation on raising the insurance cover on bank deposits from the current 1 lakh during the winter session of Parliament.

Her assertion came days after Sahakar Bharati, a non-profit with many of its office bearers close to the RSS, pitched for an increase in deposit insurance limits to 5 lakh for individuals.

"The corporation does not have the requisite information," DICGC said in response to an RTI query on whether there is any proposal or move under consideration to raise the limit of 1 lakh insured in the bank.

The DICGC which insures all bank deposits, also said depositors in failed and liquidated banks will get only up to 1 lakh as insurance cover, regardless of the amount in their accounts.

"Under the provisions of Section 16 (1) of the DICGC Act, 1961, if a bank fails/gets liquidated, the DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit up to one lakh as insurance cover, for both principal and interest amount held by him in the same right and same capacity at all the branches of a bank taken together," it said in response to the RTI application filed by this PTI journalist.

The corporation covers all commercial banks, including branches of foreign banks functioning in India, local area banks and regional rural banks.

All eligible cooperative banks as defined in Section 2(gg) of the DICGC Act are also covered by the deposit insurance scheme.

"Each depositor in a bank is insured up to a maximum of one lakh as on the date of liquidation/cancellation of bank's license or the date on which the scheme of amalgamation/merger/reconstruction comes into force," the DICGC said.

The response assumes significance with numerous instances of different banks becoming victim of frauds, putting at risk the savings of people.

On September 24, the RBI imposed operational curbs on Maharashtra-based PMC Bank and appointed an administrator following the detection of alleged financial irregularities.

According to the Mumbai Police's Economic Offences Wing (EOW), the PMC Bank management, allegedly in cahoots with a business family, concealed huge loan defaults by HDIL group firms from banking regulators.

Over 70 per cent of the bank's advances went to HDIL group, which led to a huge crisis when the realty group defaulted on repayment, the EOW said.

Government owned banks have reported frauds of over 95,700 crore in the first six months of the current fiscal.

"According to Reserve Bank of India (RBI), frauds as per year of reporting, as reported by Public Sector Banks (PSBs), during the period from April 1, 2019 to September 30, 2019 is 5,743 involving a total amount of 95,760.49 crore," Finance Minister Nirmala Sitharaman said in the Rajya Sabha last month.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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