Government actively considering raising deposit insurance limit beyond Rs 5 lakh

The government is actively considering raising the deposit insurance scheme limit beyond Rs 5 lakh, said the secretary at the Department of Financial Services, M Nagaraju, on Monday.

“As and when the government approves, we will notify it. This is under the consideration of the government,” the top official told reporters at a press conference in Mumbai when asked to respond to the crisis-hit New India Cooperative Bank.

The secretary reiterated that increasing the insurance deposit insurance is under active consideration.

Deposit insurance, as we know it today, was introduced in India in 1962. India was the second country in the world to introduce such a scheme, the first being the US in 1933. Banking crises and bank failures worldwide underscored the need for depositor protection.

Further, the secretary refrained from commenting on the status of the Mumbai-headquartered bank, which is in deep stress. “RBI is seized of the matter… we are not going to comment on that,” he said.

Eligible depositors are entitled to receive deposit insurance claim amounts of their deposits up to a monetary ceiling of Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) after due verification.

With effect from February 4, 2020, DICGC raised the limit of insurance cover for depositors from Rs 1 lakh to Rs 5 lakh.

The depositors of New India Cooperative Bank have been advised to contact bank officials for further information. Details can be accessed on the DICGC website.

On February 14, a day after it imposed several restrictions on the lender, the Reserve Bank of India superseded the Board of Directors of New India Cooperative Bank Ltd, Mumbai, for a period of 12 months.

The action was necessitated “due to certain material concerns emanating from poor governance standards observed” in the Mumbai-headquartered New India Cooperative Bank Ltd.

Customers had gathered in thousands outside Mumbai-headquartered New India Co-operative Bank Limited branches to withdraw their hard-earned savings, soon after the Reserve Bank of India imposed several restrictions on the lender. Panicky account holders converged outside the bank branches spread across Mumbai city, worried over the fate of their bank savings and lockers.

The people ANI spoke to said that bank officials have assured them access to their lockers.

On February 13, the RBI directed New India Co-operative Bank Limited, Mumbai, that it shall not, without prior written approval of the central bank, grant or renew any loans and advances, make any investment, incur any liability, including borrowing of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in the discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified by the RBI.

Considering the cooperative bank’s present liquidity position, the RBI has directed not to allow the withdrawal of any amount from savings bank or current accounts or any other account of a depositor but is allowed to set off loans against deposits subject to RBI conditions.

During the past four decades of its operations, the Bank has established 30 branches, which are located in Mumbai, Thane, Surat and Pune, according to its website. The bank achieved a “scheduled bank ” status on November 1, 1990. The bank achieved a “multi-state status” on October 22, 1999.