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Informist, Friday, Mar. 7, 2025

By Priyasmita Dutta and Sagar Sen

NEW DELHI – Depositors may have to wait a bit before the government hikes the deposit insurance limit from the current INR 500,000 to a higher amount as the Deposit Insurance and Credit Guarantee Corp. has not yet put forth any recommendation to the Department of Financial Services, a senior finance ministry official said. "They (DICGC) have to first do their internal calculation and put forth their suggestion. Currently, there is nothing on our table," the official told Informist.

Talk about the need to hike deposit insurance limit started after the Reserve Bank of India imposed several restrictions on the New India Cooperative Bank, including superseding its board of directors for 12 months, citing supervisory concerns and "poor governance standards". What added fuel to the fire was Department of Financial Services Secretary M. Nagaraju's comment at a post-Budget conference on Feb. 17 that the government is considering increasing the insurance cover for bank deposits from the current limit of INR 500,000.

According to the official cited above, as part of their usual business, DICGC along with RBI look at the deposit insurance limit from time to time based on inflation dynamics and general growth in the economy. Established in 1978, DICGC is a subsidiary of the central bank that seeks to protect depositors from the risk of losing their savings in case of a bank failure. The insurance cover of INR 500,000 per depositor is for all accounts held by the depositor in all branches of the insured bank.

The clamour to increase the deposit insurance limit has intensified because of past precedence. Last time the limit was raised in 2020 when Punjab and Maharashtra Co-operative Bank collapsed. At that time, the deposit insurance limit was raised from INR 100,000 to INR 500,000. Since its inception, the deposit insurance limit has been revised upwards six times from the initial cover of INR 1,500 per depositor.

According to data on DICGC's website, 1,997 banks are registered with the body, with 97.8% of total 2.90 billion accounts being fully protected and the remaining being partially protected accounts. In 2023-24 (Apr-Mar), DICGC received premium worth INR 238.79 billion, while it settled claims to the tune of INR 14.32 billion.  End

Edited by Ashish Shirke

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